usa march 12/3/07 9:48 am page 1 orthopaedic product news · the paris convention for the...

ProductNews

March/April 2007

OrthopaedicUSA March 12/3/07 9:48 am

Enquiry No 2

USA March 12/3/07 9:48 am

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FROM THE EDITORDear Doctor

SURGEON AS ENTREPRENEURObtaining Foreign Patent Protection

PRELIMINARY RESULTS OF THE OPN READERSURVEY

ARTICLECommercializing Innovative Medical Technology: Start-up andVenture Capital Options

PRODUCT FEATURESPower Tools

PRODUCT FEATURESUpper Extremity

FUTURETECHEmerging Orthopaedic Technologies & Treatments

ORTHOINVESTOR UPDATEIncluding Ticker Track & Company Financials

ARTICLENew Advances in Power Tool Technology

ARTICLELiability Protection Clauses: the Ins and Outs of D&O Coverage

ARTICLEImproved Technology of Tissue Stabilization for Joint Repair andReconstruction

SURGEON AS ENTREPRENEURSurgeon-Owned Device Companies: A Risky Proposition

ARTICLEPhysician: Embrace the New Attitude

ARTICLEBusiness Incubation: the Path from Surgeon to Inventor toEntrepreneur

PRODUCT NEWSProduct News Section

EXECUTIVE PROFILEBernard Legrand, Chief Executive Officer, SO+

FISCAL FITNESSFinland to Korea, Screws to Shaver Blades: New CompaniesGain Access to U.S. Market for their Upper Extremity or PowerTools

ENTREPRENEURIAL EVENTS CALENDARA comprehensive guide to alternative meetings and events

THE TOP LINEA New Year Brings New Compliance News

HERE’S TO YOUR WEALTHHow Much Money do you Need to Retire?

CLASSIFIED

March/April 2007

Upcoming IssuesJuly/August 2007

Sports Injuries and Hand and Foot Surgery

Submissions or enquiries to any future issues of OPN can be emailed to:[email protected].

In The Next IssueMay/June 2007

Fixation & Trauma and IT in Orthopaedics

Swiss-based manufacturer Soplusannounces an innovative power tool systemfor large bone, reconstructive, trauma andsports surgery called the SO+ Universal.This is based on a single ergonomically-designed handpiece, to which any one of alarge number of different attachments can befitted for drilling, sawing, reaming, etc. Thehandpiece exists in battery, AC adapter andpneumatically-powered versions. The resultis an easy-to-use, compact, lightweightprecision tool which delivers an unprece-dented degree of flexibility and power,enabling the surgeon to operate with greater accuracy, particularly inminimally invasive surgery or procedures such as hip resurfacing.

SO+ prides itself on offering a perfect fit with the needs of bothsurgeon and administrator. During a surgical procedure, the surgeonworks with a single handset, changing attachments as required. This savestime, and reduces the amount of equipment needed in the surgicalenvironment. Alternatively, the surgeon may prefer to work with a smallset of dedicated handpieces ready-equipped with the attachments he willneed for the procedure.

Interchangeability also brings benefits to administrative and nursingstaffs. Fewer items need to be purchased and managed, thus reducing costs,maintenance requirements and the frequency of battery charging routines.

The state of the art SO+ Universal line features a number of innovativetechnologies. These include brushless, sensorless, electronically-controlled250-watt motors for extra power and reliability. The battery version of thehandpiece uses 18-volt, high-capacity lithium-ion rechargeable,autoclavable or drop-in batteries. The pneumatic version is designed arounda powerful, silent, low-maintenance pneumatic in-line ceramic motor.

SO+ is the new brand of Sodem Systems, based in Geneva,Switzerland, a leader in orthopaedic power instruments for 25 years.

Soplus by Sodem Sodem diffusion SA

110 chemin du Pont-du-Centenaire1228 Geneva, Switzerland

Tel : +41-22-794-96-96, Fax +41-22-794-45-46www.soplus.ch, [email protected]

Enquiry No 1

SO+ Universal

Published in the U.S. by: Knowledge Enterprises, Inc.Address: 147 Bell Street, Suite 303, Chagrin Falls,

Ohio 44022 USATel: 440-247-9051 Fax: 440-247-9053

Web Site: www.orthoworld.com

Editor in Chief: John Engelhardt - [email protected] Editor: Julie Vetalice - [email protected] Editorial Consultant: Ann Monk - [email protected] Coordinator: Julia Ewell - [email protected]: Joanne Montz - [email protected]

Every effort is made to ensure that information given in this magazine is accurate but no legalresponsibility is accepted by the Editor or Publisher for errors or omissions in that information.Readers are advised to contact manufacturers directly. Views expressed by contributors are not

necessarily shared by OPN.

Copyright © 2007 Pelican Magazines Ltd and Knowledge Enterprises, Inc.


4 Orthopaedic Product News • March/April 2007

Dear Doctor,This 12th issue of U.S. Orthopaedic Product Newsbenefits greatly from our recently-completed readersurvey. As you will see inside, we have immediatelybegun to incorporate your suggestions for content. Anarticle in this issue provides some preliminary results ofthe survey.

In keeping with your requests to include instruction onalternate revenue streams, you will find an article aboutin-office dispensing of pharmaceuticals. We areinterested in your feedback on this matter as well as theopportunity.

On the entrepreneur track, we have included threeexcellent articles. One on obtaining venture capital, another on the importance of oft-ignoredDirectors and Officers insurance and a fascinating glimpse of life inside a business incubator.

The above being said, the debate over surgeon ownership continues, and we feel compelled to reprintan article on the subject from the Washington Legal Foundation. For further perspective, Teresa Fordprovides an update on the overall compliance landscape. It seems that it may be a while before weget some real clarity.

On the technology front, we provide an excellent article on the future of power technology as well asa feature on an emerging platform for soft tissue repair.

Shirley Engelhardt’s article is a fascinating reminder that the small bone market continues to attracta wealth of new entrants, and remains one of the most vibrant in the orthopaedic space.

As is our continued commitment to you, herein are featured the latest and greatest products in theupper extremity and power equipment universe, including an interview with the principals of SO+, acutting edge power equipment company.

Jeff Mackevich, our financial guru, gives a perhaps sobering perspective on what you might want toconsider in preparing for retirement.

We remain committed to providing you with the most up to date and expert advice on the businessof orthopaedic medicine.

John A. EngelhardtEditor in Chief

FFRROOMM TTHHEE EEDDIITTOORR


Enquiry No 3



My earlier articles, including the series of the “Golden Rules” of patentlaw, were intended to acquaint the reader with the basic process ofobtaining a U.S. patent for a new invention. While those articles did con-tain some universal information that would be helpful in an effort toobtain any patent, they were not intended to address specific issues orprocesses that are peculiar to obtaining patent protection in foreign coun-tries. While Title 35 of the U.S. Code defines a patent holder’s right toexclude others from making, using or selling his claimed invention inthis country, it is of no effect with regard to patent protection in foreigncountries. Each nation has its own code of laws that govern the behaviorof individuals and businesses within that country. A person desiring apatent in a particular country must make an application for patent in thatcountry, in accordance with that country's requirements. Efforts havebeen made to assist inventors in their efforts to obtain patent protectionat home and abroad. This article will address some of the provisions thathave been made to harmonize patent application procedures and will alsoprovide information about some of the concerns that are unique toobtaining foreign patent protection.

Several international treaties offer aid in applying for internationalpatent protection, including the Paris Convention Treaty and the PatentCooperation Treaty, otherwise known as the PCT. Generally, each coun-try’s law is different; however, due to the provisions of these internation-al treaties, several important common factors should be complied withwhen seeking international patent protection.

United States law requires, in the case of inventions made in the U.S.,that the patent applicant obtain a license from the Commissioner ofPatents and Trademarks before applying for a patent in a foreign coun-try. This foreign filing license is required if the foreign application is tobe filed before an application is filed in the U.S. or before the expirationof six months from the filing of an application in the U.S. The filing ofan application for a patent constitutes the request for a license, and thegranting or denial of such request is indicated in the filing receipt mailedto each applicant. After six months from the U.S. application filing datea license is not required unless the invention has been ordered to be keptsecret. If the invention has been ordered to be kept secret, the consent tothe filing abroad must be obtained from the Commissioner of Patents andTrademarks during the period the order of secrecy is in effect.

The laws of many countries differ in various respects from U.S. patentlaw. In most foreign countries, public disclosure of the invention beforethe date of the application will bar the right to a patent. This is oftenreferred to as the requirement for absolute novelty. This distinction is

what makes it advisable to file the U.S. application prior to public disclo-sure of the patent, even though the U.S. patent law provides for a oneyear grace period. (This one year grace period permitted under U.S.patent law is discussed in an earlier submitted article in this series.) Sinceother countries do not have such a grace period, the prior disclosure ofthe invention will prevent the filing of international applications in mostcases.

The Paris Convention for the Protection of Industrial Property, firstpresented in 1883 and subsequently amended and modified, is an inter-national intellectual property treaty adhered to by more than 100 coun-tries. The Paris Convention provides that each country guarantees to thecitizens of the other member countries the same rights in patent andtrademark matters that it gives to its own citizens.

The treaty also provides for the right of priority to earlier filed appli-cations for patents, trademarks and industrial designs (design patents inthe U.S.). On the basis of a first patent application filed in one of themember countries, the applicant may, within a one year period of time,apply for patent protection in all the other member countries. Under thetreaty, these later applications will be treated as if they had been filed onthe same day as the first application. Thus, these later applicants willhave priority over applications for the same invention which may havebeen filed during the same period of time by other persons. Further, theselater applications will not be invalidated by any acts accomplished afterthe initial application filing date. To be entitled to this priority benefit,the earlier filed patent application must contain an enabling disclosure ofthe invention defined by the claims of the latter filed application. Theright to priority is not dependent upon the final disposition of the earlierapplication. That is, if the earlier filed application is abandoned or forany reason fails to issue as a patent, it does not affect the right of priori-ty claimed for the subsequently filed patent application.

This right of priority under the Paris Convention allows public disclo-sure of the invention after the filing date of a U.S. patent application butbefore the filing date of the international application without concern forthe absolute novelty requirement mentioned earlier. This priority rightapplies only for countries that are members of the Paris Convention. Forthis reason, patent applications in non-member countries should be filedbefore any public disclosure of the invention.

Within one year of filing a patent application in the U.S., the ParisConvention allows the filing of patent applications directly in other

SSUURRGGEEOONN AASS EENNTTRREEPPRREENNEEUURR

continued on page 8

Author: Perry E. Van Over, Esquire

Obtaining Foreign Patent Protection


Enquiry No 4




countries with the benefit of priority of the filing date in the U.S. Fullapplications are filed in these countries, and examination of the applica-tion generally is not deferred. Paris Convention patent applications areoften used when an applicant only wants to file in several countries, or ifa desired country is not a member of the PCT. The costs of filing andlength of patent examination under the Paris Convention vary by coun-try.

In addition to the Paris Convention, the treaty known as the PatentCooperation Treaty provides for the filing of applications for patents onthe same invention in member countries. The PCT provides for central-ized and harmonized filing procedures whereby a single application filedin a PCT governmental receiving office is accepted as an application forpatent in other member countries. After the PCT application is filed, oneof the PCT governmental searching offices will perform a patent searchfor the invention as defined in the claims of the application. After com-pleting and reporting the search, the application will be studied under theexamination processes known as “Chapter II” and an opinion ofpatentability pursuant to the patentability standards set forth in the PatentCooperation Treaty will be sent to the applicant. After receiving the non-binding patentability opinion, the applicant will determine which coun-tries will be designated for national stage filing of the application.

A PCT application must be filed within one year of filing a patentapplication in the U.S. Thanks to the initial search and internationalexamination of a PCT application, the applicant is able to delay costlynational stage filings in other countries. A PCT patent application candelay filing a patent application in other countries for up to 30 monthsfrom the original filing date in the U.S. Some countries additionallyallowed for deferred examination of a PCT patent application, which candefer examination for another 3-4 years.

The PCT includes all of the major economies of the world exceptIndia and Taiwan. Under the PCT, an applicant can designate specificcountries or regional conventions by filing an international patent appli-cation in the appropriate receiving office. Of late, the rules have permit-ted that all member countries are included in the initial designation andonly at the time of entering national stage does it become necessary forthe applicant to select specific member countries for final examination.The U.S. Patent and Trademark Office (USPTO) serves as the PCTreceiving office for U.S. nationals and residents. U.S. nationals and res-idents may select the USPTO or the European Patent Office (EPO) as theInternational Searching Authority. Both the USPTO and the EPO allowthe proceedings to be conducted in English and also allow the applicantto be represented by a U.S. patent practitioner during the PCT examina-tion process. If the applicant selects the EPO as the InternationalSearching Authority, the applicant may also select the EPO as thePreliminary Examining Authority.

The PCT filing and examination process can cost several thousanddollars, whereas obtaining national patents in foreign countries typicallycosts several thousand dollars, and up to several tens of thousand dollars,per country. Many applicants therefore prefer a strategy that delays thefiling of foreign national applications until the latest possible date. Thisstrategy gives the applicant the longest possible time to evaluate the com-mercial prospects of the invention before committing very substantialfunds to the foreign national application process. The PCT is the vehiclethat allows the applicant to delay the filing of foreign national applica-tions until the latest possible date.

As noted above, the Paris Convention allows the filing of foreignnational applications to be delayed until one year from the U.S. filingdate. Under the PCT, the filing of national phase applications can be fur-

ther delayed until 20 or 30 months from the U.S. filing date, at the appli-cant’s election. The decision to enter the national phase cannot ordinari-ly be extended beyond 30 months from the priority date.

A PCT application provides several benefits to applicants. First, itallows the applicant to delay the large cost of filing national stage appli-cations around the world. Second, it allows the applicant two opportuni-ties for international examination, which will give an early indication ofpatentability. Third, it allows the applicant to see how his U.S. patentapplication does in the U.S. Issuance of a patent in the U.S. does notguarantee patentability in other countries; however, it does give an indi-cation of patentability. If the prosecution of the application went wellwith the U.S. patent examiner, it may have a positive influence on for-eign patent examiners. Fourth, some countries will allow a granted U.S.patent to be filed as an amended patent application through the PCT, thussaving costs and time.

The filing fee for a PCT patent application varies based on severalfactors to include the number of pages, number of claims, number of fig-ures and the like. In addition, the applicant can expect to pay $500 to$1,000 in legal services for a U.S. law firm to prepare a basic PCT patentapplication from an earlier filed utility patent application. Preparing aPCT patent application from a provisional patent application will nor-mally require additional time and thus additional expense to satisfy statu-tory requirements. In addition to the patent office filing fee, a patentsearch fee is charged. When a PCT application and a U.S. application arebeing filed on the priority basis of an earlier filed provisional patentapplication, they can be filed on the same day so long as that filing dateis within one year of the provisional patent application filing date. If,however, the PCT application is filed on a date subsequent to the non-provisional U.S. application, a savings of $700 (under current rules) forthe search fee can be realized.

As can be seen, patent costs can multiply tremendously with anincrease in the number of countries in which patent protection is sought.Choosing prudently the countries in which to apply national stage appli-cations is the key to keeping costs down.

Applicants filing international patent applications must also considertranslation costs, which can become very expensive. While the initialinternational examination of a PCT application can be done in theEnglish language, the PCT process does not shield applicants from trans-lation costs incurred during the national phase examination.

A common tactic taken by lone inventors or small entities, to helpreduce their expenses when filing international applications, is to find alarger, better funded partner to whom they can license the patent orpatent portfolio. If stipulated in the contract, the partner or licensee maytake partial or total responsibility for prosecuting, maintaining andenforcing the patents in the home country or abroad. The delay betweenPCT application filing and the time for entering the expensive nationalstage examination can be used to good advantage to locate and make thedeal with such partners.

Clearly, international patenting can represent a significant financialinvestment. A number of the costs associated with filing applications andmaintaining granted patents can be reduced or contained with carefulmanagement. But cost management must also take into account the needto avoid increasing business risks or lowering the quality of the resultingpatents. These are business decisions and not legal issues; however, greatcare should be given to planning the growth and maintenance of a strongpatent portfolio. It is in this area that a patent attorney can provide guid-ance.

continued from page 6

continued on page 9


March/April 2007 • Orthopaedic Product News 9


A common strategy for many U.S. applicants is to designate onlythose countries in which the applicant is likely to exploit the invention.A further consideration is designating only those countries in which thelegal system is sufficiently sound to be an effective vehicle for enforcingpatent rights. The decision to pursue a patent should be evaluated in acost-benefit analysis, and applicants can eliminate many countries fromconsideration through sound market analysis.

In seeking to control costs, it must be understood that cost will varybased upon the field of technology, nature of the invention, length of theapplication, number of claims, number of figures, hourly rate of foreignagent, number of countries, translation costs, number and nature ofobjections raised by the examiner and whether there are any oppositionproceedings or appeals.

Within the PCT are regional conventions wherein certain geographi-cally, economically related countries are grouped to provide a more eco-nomical approach to national stage application examination.

As an example, the most important regional convention for many U.S.companies is the European Patent Convention, which provides unifiedpatent examination and issuance for its 18 member countries. The EPC,which is administered by the EPO, is a centralized filing, examining andpatent-granting procedure for its member Western European countries,including all 15 members of the European Union, formerly known as theEuropean Community. Filing in the EPO results, if successful, in a bun-dle of identical national patents that are enforceable in each designatedcountry of the EPC. This bundle of patents is less expensive to obtainthan individual national patents if the applicant designates three or morecountries in the EPO application.

Significant savings are realized in translation costs alone through theend of the examination procedure. These costs are, for the most part,deferred until the patent examiner has approved the English version ofthe patent application. After approval, the application is published andcompetitors have an opportunity to oppose grant of the patent, resultingin an administrative proceeding in which both the opposing party andapplicant participate. In the EPO, rejections by the examiner can beappealed.

After approval by the EPO, the allowed application may be registeredin each member country designated at the time of filing the EPO appli-cation. Most member countries require complete translation of theallowed EPO patent application. At most, three languages are required:English, French and German. Costs after allowance can be substantial,but those costs have been deferred until the applicant knows that thepatent application will be allowed.

Additional cost in the area of foreign patents that must be consideredis that of maintenance fees. Maintenance fees are required in most coun-tries, but they will differ in timing and amount from U.S. maintenancefees. In addition, most countries require that a patented invention bemanufactured in that country after a certain period, usually three years.This is generally referred to as the “working requirement.” If there is nomanufacture within this period, the patent may be void in some countries,although in most countries the patent may be subject to the grant of com-pulsory licenses to any person who may apply for a license.

From the brief discussion above, it is apparent that the process ofobtaining international patent protection can be both complicated andexpensive. Judicial planning based upon market analysis, good patentportfolio design and partnering with larger corporations can help reducecosts and streamline foreign patent prosecution. Fortunately, internation-al treaties have been structured to centralize and harmonize the process.

The intention of this series of articles is to acquaint the reader with theneed to exercise due care in seeking patent protection in the U.S. and inforeign countries. As such, these articles are not intended as legal advice,but only as a caution that proper legal counsel should be engaged by any-one seeking to obtain patent protection for an invention.

Perry Van Over is the Founding Member of Perry E. Van Over &Associates, PLLC, an intellectual property law firm specializing inpatent procurement, licensing and litigation in the technical fields of sur-gical instruments, medical devices, molecular biology, pharmaceuticals,biochemistry and polymer chemistry. He can be reached at 703-543-6456 or [email protected]


To see yourproducts

listed within theProduct News andProduct Feature

sections

email your information to [email protected]

Enquiry No 19



In the fourth quarter of 2006 we completed our survey of OPN readers.The purpose of the survey was to seek guidance from you towards thegoal of making OPN the single most valuable tool you have in your questto guarantee your continued success as surgeons. We will use the resultsto constantly improve this publication in accordance with the things mostimportant to you. Below we share some of the key results that we havebegun acting on already.

Who you are:

Exhibit 1 shows the breakdown of readership by primary practicefocus. The number of years in practice appears in Exhibit 2, while thenumber of procedures performed monthly is shown in Exhibit 3.

Exhibit 1. OPN Surgeon Readers: By Practice Focus

Exhibit 2. OPN Surgeon Readers: By Number of Years in Practice

Exhibit 3. OPN Surgeon Readers: By Average Number of SurgicalProcedures Performed in a Month

What is important to you:

Below details your responses to the types of issues you find mostcritical, and hence would like to see more of in this publication. Anasterisk (*) indicates that the response was received multiple times.

Question: What other types of articles would you like to see in US OPN?

Answers:Awards, achievements*Ex-U.S. orthopaedic market issues and trends*PT - (rules) ownershipHMO information: HMO/Surgeon relationships, HMO-related stats,legalities with HMOs*Specific topics such as pediatric orthopaedics, trauma, orthobiologics,pain management, bone growth stimulators*More and newest products/procedures including spine, IT*What can I do to make my practice more successful; expandedbusiness models*More clinical info broken down by issues—spine, hip, knee, etc.*Inventors/patent ideas-processes-challenges/choosing representation*Market updates/analysis, including spine*Online resources Distribution deals—how to get them How hospitals profit from orthopaedicsArticles on Ancillary Services in the office, e.g. MRI SurgeryCenters*Reimbursement issues

Preliminary Results of the OPN Reader Survey

continued on page 11



Who to call when you know there are going to be issues, legallyInvesting advice/more investor updates - expand the updates andprofile companies who are doing well*Retirement planning for smaller practices More company updates/interviews, including successful experiencesin spine*Mergers - more info on how current and pending company mergerswill affect the marketDepartment of Justice - could there be an update each issue? Theinformation that is available is very scattered. Meeting follow up for those who could not attend. Hot products, thebuzz from each show.

Question: What other sub-segments of the market would you like to seehighlighted in US OPN?

Answers:Orthobiologics*Pain management*Shoulder*ElbowMore knees/knee bracingFracture and fixation Joint replacement*Spine Software/IT*PediatricsTissue engineeringComplex wound management products as related to traumaticreconstruction for hand, foot, ankle etc. Spinal cord and Per Nerol stimulatorsSurgical and clinical issues that relate to orthopedics such as propersterilization, post-op infection rates, etc. Post operative devicesEmerging technologyCompany technical capabilitiesLegal Malpractice

Question: What are your key non-clinical concerns as an orthopaedicsurgeon today?

Answers:Medicare/declining reimbursement, general reimbursement issues*Increasing regulation*Ability to create an integrated practice with ancillary servicesOffice concerns: paperwork, consistent office practices, minimizingexpenses and overhead*Protecting my assets/patents*Income (Increasing/maintaining)*Debt accumulation Long term care None, I do only minor outpatient trauma/work for a large HMOThird party payersWhat does my practice look like 10 years from now; what do I do nowto make sure that practice is successful as it can be Medicare HMO issues, hospital gridlock on equipment, HMO interference*

Insurance premiumsMalpractice/protection from lawsuits/liability*Family/leisure/time management*Retirement planning*Investments*Knowing who to trust and what I can and cannot accept fromcompanies Generating revenue from areas other than patient treatmentStandardization of quality*Staying current on technologyIntangible incomeEquipment cost Increase in patients*TaxesSurgery center investmentEvolving my practice without upgrading my technologyDepartment of Justice investigation

Moving forward, we will focus on these issues by providing youexpert opinions and discourse. We thank you for your enthusiasticsupport and welcome your continuing feedback.


Enquiry No 20

Enquiry No 5



If you are a surgeon or an engineer and you have an idea for a medicaldevice, inertia over your next steps can paralyze the venture. What is areasonable development plan? Should you partner with a large company,raise money from a venture capital (VC) group or try friends and fami-ly? How much should you raise? What sort of management team do youneed? This article will address some of these common questions as wellas the role that venture capital can play.

Milestone ManiaStarting a company with outside capital involves, for the inventor, a

process of trading ownership for resources—namely money, manage-ment, technology and eventual marketing. Although some inventorsbelieve that once they have finished writing their idea on the back of thecocktail napkin they are merely months away from ramping up sales, alengthy process of design, development, testing, re-design and humantrial work needs to take place. With any idea, it is critical to identify thekey risks early on and utilize the money to mitigate those risks. Muchupfront planning should be done to identify major milestones where riskis reduced, and to finance the company in stages to achieve those majormilestones.

It is best to stay lean in the initial proof of concept stage, adding onlythose full-time resources necessary to achieve milestones that reduce keyrisks. Think of the “Million Dollar Person” principle—if a typical ven-ture takes about five years, each additional full-time employee will costthe company roughly $1 million over those five years (including salaryand benefits). If you add ten employees, count on raising $10 million justto fund operations. Needless to say, it is important in the earliest stagesto only hire full-time employees in the areas most vital to achieving keymilestones. Make use of consultants or contractors everywhere else.Early-stage risks are principally technical in a medical device project, sothe majority of the dollars should support engineering and developmentresources that can figure out the technical issues. This doesn’t necessar-ily require a “serial entrepreneur” at the helm. These types are few andfar between and often won’t be interested in an early-stage project, ormay not be skilled to handle the heavy duty technical development workthat adds the most value to a project. Our firm has had good luck withproject managers, even first-timers to the start-up world. These may beengineers or marketers who can effectively marshal a plan forward.

Once proof of concept is established with the product developmentteam, another round of financing usually ensues to complete the productdesign, initiate a clinical study and define the regulatory pathway. Theproject leader can continue to push the ball forward in this setting, but ifenough proof is established and challenges have begun to surpass theoriginal capabilities of the project leader, it may be time for a CEOrecruit.

The next round of financing typically covers the regulatory/clinicalphase of the company. This is where the original management team mayhave the hardest time adapting and surviving. Technical challenges thatonce faced the company have (hopefully) been replaced by different andmore amorphous ones, such as negotiating a trial with FDA, initiating aclinical trial and actually getting enrollment of that trial! The team needsto be filled out with experts in regulatory, clinical trials and some levelof marketing. The tight control that the initial company founders oncehad has dissipated with the influx of new team members, new boardmembers and of course, new money. At this point, a more experiencedCEO can often add the most value and lead the company through a morecommercially oriented phase.

Structured in such a way, the company preserves the option and flex-ibility to explore corporate partnering or acquisition opportunities fol-lowing the completion of each set of milestones.

$$$$$$$With your plan in hand, you must start thinking about how to advance

the project. There is no right answer about where to go for money.Success stories and failures abound from those who have worked withlarger companies, gone to venture capitalists or stuck with their own per-sonal resources/friends. Where you should go depends on the idea, thepeople/expectations behind it, the amount of capital required and a prop-er assessment of the pros and cons of each funding source.

Strategic PlayersThe benefit of developing your idea with a large strategic partner is

their resources—engineers, machine shops, cadaver labs, animal facili-ties, specialists in regulatory, packaging, marketing, intellectual proper-ty, reimbursement, etc. Should the idea mature into a commercial prod-uct, this partner will also have the distribution resources to penetrate themarket.

However, consider certain trade-offs in this sort of partnership. First,and most importantly, your objectives may not be aligned with those ofyour corporate partner. Your idea may be one of many in the big compa-ny’s hopper, and it may not get the attention it deserves. With the normalturnover that occurs in the corporate environment, your idea’s championsmay not be there the next day. Corporate will may not be strong enoughto overcome the inevitable bumps in the road faced by devices as they gothrough design and re-design, and resources may be diverted to otherprojects. There may have been other reasons for their interest in yourtechnology—for instance, is it competitive with one of their existing

AARRTTIICCLLEE


Author: Geoff Pardo

Commercializing InnovativeMedical Technology: Start-up and Venture Capital Options



AARRTTIICCLLEE


products? If so, they may be trying to secure the intellectual property toprevent a competitor from scooping it up, and may not have serious plansto develop and commercialize your idea.

Certainly there are corporate partnerships that work for the entrepre-neur; however, it is our experience that most ideas need to be developedto a certain degree before a buyer will attach any significant value to it.Thus, the entrepreneur has to find a way to raise capital.

Sticking with Friends and FamilyThe pro of this approach is that the entrepreneur can build value and

potentially retain more ownership through subsequent financing rounds.However, the cons usually outweigh the pros, as this initial financing israrely done in a fashion that permits the entrepreneur to actually retainthat ownership. First, the friends and family rounds are often priced atvaluations that won’t be supported by follow-on institutional investors.Second, invariably not enough money is raised to reach critical mile-stones, and continuing to tap friends and family for dollars can be prick-ly. If significant amounts of additional capital are required your UncleBob or college roommate may not be in a position to continue the fund-ing. Third, the entrepreneur typically doesn’t surround himself with advi-sors and management who can lend appropriate expertise, with the neteffect being that things take longer, mistakes are made and the project isjeopardized.

Going the Venture RouteAn alternate path is to raise venture capital for a medical device idea.

On the pro side, a company is formed around your idea with is a totalfocus on bringing that idea forward to success. In this regard, there isusually excellent alignment of goals and objectives between the ownersof the company—founders, investors and employees. In fact, venturecapitalists are surprisingly easy to understand in that all they want is tomaximize the return on their investment dollars. The company exists topush the opportunity and maximize its value, which benefits all share-holders. Even in the event that the company diverges from the originalinventors’ concept, the motive is success—the common denominatorwhich unites the inventor with other stakeholders.

The venture capital process also subjects the company to vetting bythe marketplace—other investors, other physicians, intellectual propertycounsel, etc.—such that weaknesses are identified, concepts are refinedand value increases prior to acquisition or entry into the public markets.

By remaining independent of any single strategic partner, the venture-backed company can eventually stimulate an auction amongst the poten-tial corporate acquirers and drive value through the ensuing competition.With a license deal to a strategic partner, the ability to create a competi-tive auction is limited because often there is not enough progress in thecompany to get enough parties interested. The strategic partner has sig-nificantly more leverage at this stage than when the product is fullydeveloped, proven in the clinic and the company has the ability to standon its own.

A pitfall of venture capital is that it can be difficult to raise money fora technology that is in the idea or concept phase. So much money hasflowed into venture capital that the notion of investing $500,000 in a sin-gle deal is not a manageable concept for most large venture capital firms.These large funds are increasingly focused on companies that havealready completed the product development phase and are in the clinicalor marketing phase. As a result, the inventor/entrepreneur is often leftwith the phrase, “You’re too early for us,” or, “Come back when youhave clinical data.” A handful of funds will invest in early-stage ideasand have no problem writing a smaller check. Spray Venture Partners isone of them, and others exist.

Another pitfall is that there is such a thing as raising too much moneyat too high a valuation early in the company history. That may sound self-serving, but raising just enough money to address key, risk-reducingmilestones is an approach that brings discipline, clarity and urgency tothe business. The seduction of raising a lot of money from large fundsmay be wonderful for the ego in the short-run, but often leads to lack offocus in achieving key milestones, over-hiring, over-spending and anexpansion into multiple applications of the technology which ultimatelydo not maximize value.

Perhaps more important is that when the entrepreneur raises a hugeround at a high price, goals and expectations begin to diverge betweenthe entrepreneur and the venture capitalist. Once the money goes in andis spent, there is more pressure on the entrepreneur to make the appropri-ate zigs and zags to maximize the technology’s value. No VC wants totake a write-down on the high valuation, so instead of making whatmight be the right decision for the company—for instance, going back tothe drawing board—the company continues to raise money for the paththat they are on, and expectations and commitment continue to mount forwhat may be the wrong plan.

Going the venture capital route inevitably means giving up control ofthe ownership of the business. This is probably the hardest thing forentrepreneurs to accept. However, as an owner in the venture-backedcompany, you may actually retain more influence than if you license thetechnology (effectively ceding control) to a strategic partner. Also, creat-ing the highest probability for success is what should drive business deci-sions. Part of that is finding the resources that give the business the high-est chance for success. As the cliché goes, you can own 100% of an enti-ty that never goes anywhere or a 10% of one that is wildly successful.

Economics of a Start-up vs. a Licensing Deal: an ExampleEconomic factors which may merit forming a company and develop-

ing the technology instead of licensing it to a strategic partner. Considerthe following example. An inventor licenses a technology to a strategicpartner with an attractive five percent royalty rate. That technology istaken to fruition in three years, and in years four, five and six, the prod-uct ramps to revenues of $5 million, $16 million and $32 million, respec-tively. This represents royalties to the inventor of $250,000 in year four,$800,000 in year five and $1.6 million in year six, for a total take of$2.65 million.

Consider success in the start-up scenario. Here, the inventor forgoesthe licensing deal and raises $500,000 from a venture group, taking 40percent of ownership while the VCs take 60 percent in exchange for theirinvestment. Similar to the licensing deal, the first three years are spentproving the technology technically and clinically, and rounds of $6 mil-lion, $15 million and finally $25 million are raised to commercialize thatdevice. With each round of financing the inventor gets diluted until heholds ten percent of the company. However, in year six, revenues standat $32 million and a strategic player acquires the company at $300 mil-lion (not a crazy multiple of sales). The founder’s share of this is a cool$30 million, as opposed to the $2.65 million from the licensing deal.

Every circumstance is unique, and not every idea is suitable for a ven-ture financing. Furthermore, the economic upside is not the only variablein the decision-making process. However, as this example depicts, theeconomic outcome in success scenarios for licensing and forming a start-up can be very different.

What is Venture Capital, and How do I Get It?I’ve convinced you that you should at least consider starting your own

company, but what exactly is venture capital? VC is a dedicated pool ofcapital, raised from institutions or individuals called Limited Partners.



Enquiry No 6



Limited Partners are typically institutions such as endowments, pensionfunds or money managers that are investing for long term capital gains.A venture capital fund typically targets ten to 30 investments, with highreturn expectations. These return expectations correlate to the perceivedrisk of the venture, with investors seeking ten times multiples on theirinvestment from earlier stage companies, to two to three times returns onlater stage companies.

Getting in the door of a venture capital fund can be tough and oftenfrustrating. VCs typically see thousands of business plans every year.Standing out from the crowd can be challenging. I offer the followingtips.

Do your research! Narrow the field to those firms that would be mostinterested in a medical device. Find online directories of VC firms, andpick those that invest in healthcare. Visit their websites and get a flavorfor their areas of interest, how they like to structure their deals andwhether they do device deals. Doing your research can save a lot of timeand make fundraising much more efficient.

Get a personal referral. If you know someone credible with a contactat a VC firm, they may be your ticket to a first meeting. Credibleresources can include the CEO of an existing venture-backed start-up, anindustry veteran, patent attorney and other service providers.

Once you are in the door, be prepared to answer the question, “Whyinvest now?” Embedded in this question is a desire to understand themarket, clinical need, competition and the advantage of your new tech-nology.

If you get past the first meeting, a due diligence process commences.This can be different for every VC. Principally, the venture firms are try-ing to understand market, product and management risks. Market risk isusually the hardest for any venture capitalist because fantastic technolo-gies will not succeed if the market doesn’t exist. Product and manage-ment issues are usually risks that VCs will take because they are address-able. In that vein, the focus will ultimately turn to the plan to develop theproduct and management team and begin to eliminate those risks.

While not every start-up succeeds, you don’t have to look far to findexamples of successful device companies—Confluent Surgical, St.Francis, OsteoBiologics—orthopaedic companies that got acquired inthe past year for over $1 billion cumulatively. Countless otherorthopaedic companies raised significant rounds of venture financingand have a shot at turning their idea into better care for the patient and asuccessful outcome for shareholders.

Geoff Pardo is a Partner in Spray Venture Partners. He has over 11 yearsof operating and venture experience. He was a former Product Managerwith Synthes USA and has been in the venture business for six years,focusing on medical technology. He currently serves on the board ofHighgate Orthopedics, Kolis Scientific, Cascade Ophthalmics andSolace Therapeutics, and plays an active role with Intrinsic Therapeuticsand Facet Solutions. He can be reached at [email protected].

AARRTTIICCLLEE


Enquiry No 21

Enquiry No 7



Power Tool Accessories

StrenuMed Inc. is an innovative medical products manufacturingcompany offering a wide range of cost-effective orthopaedic powertool accessories. Established over ten years ago, we focus on cordless,battery-powered surgical instruments for large and small bone use.These accessories include:

• A full line of replacement battery packs• Advanced Motor Control Electronics• Brushless 3-phase motors• Battery Chargers and Testers• Cordless power tool repair and refurbishment• Motor rebuild

StrenuMed offers these products and services to hospitals, medicalcenters, clinics and repair facilities. Electronic products can be pur-chased as easy to install units or can be factory installed at our FDAregistered Medical Manufacturing plant. As well, most of our productshave certification under the CE Mark. StrenuMed is Creative Designsin Cordless Technology.

StrenuMed Inc.Tel: 805-477-1000www.strenumed.comEnquiry No 23

MicroAire® Battery SmartDriver™ XT

The MicroAire®

SmartDriver™ hasbecome a standard of

excellence fororthopaedic surgery around theworld because of its pure powerand the versatility it providesfor various procedures.MicroAire initially enteredthe battery market with apowerful, long lasting, envi-

ronmentally friendly technologyin Nickel Metal-hyrdride

(NiMH). As this 14.4V batteryoffers longer run times and more power

than NiCd, the surgeon does not have tochange out the battery in the middle of a procedure.

Following the success of the Battery SmartDriver and the NiMH bat-tery technology, MicroAire has taken the next step by integrating thisbattery with the new Series 7000 large bone instruments used in total hipand knee procedures.

MicroAire Tel: 434-975-8000 or 800-722-0822www.microaire.comEnquiry No 22

High-Speed Drill - Unique Modular System

The High Speed System from SO+ is a unique, modular system for use in multiple areas: spine, revision, plastic andreconstructive, and hand and foot surgery.

Consisting of a single, pneumatically-powered 80,000 rpm motor unit and a comprehensive range of adapters,attachments and burs for a wide variety of precision surgical procedures, the High Speed System from SO+ address-es the needs and preferences of the entire surgical staff. The system is compact, lightweight and reliable.

The High Speed System’s motor now provides 30% more power. Its power output is infinitely variable by meansof a comfortable foot pedal. It needs absolutely no lubrication, and runs quietly, with no build-up of heat.

The system is designed around a patented technology which enables the surgeon to change to an attachment of adifferent length, without having to change the bur, therefore reducing the number of burs needed for a procedure. The system offers a completeline of straight attachments of different lengths, as well as a series of straight tapered and angle tapered attachments and an adjustable drill guide.The wide range of burs available includes round, diamond round, straight, flame, drum, carbide, cone and graft burs, as well as diamond saws,screw plate cutters and neurocutters. Other burs are available for craniotomy, laminectomy or sternotomy procedures. Assembly is fast, straight-forward and safe, thanks to the High Speed System’s safety quick-locking device.

A patented, “one-size-fits-all” system that helps surgeons to work more quickly and efficiently, while enabling hospitals to reduce inventorycomplexity: the High Speed System from SO+ is the perfect fit with everyone’s needs.

SoplusTel: 41-794-96-96 www.soplus.chEnquiry No 24

PPRROODDUUCCTT FFEEAATTUURREESS

Power Tools


Enquiry No 8



Equinoxe™ Shoulder System—Anatomical, Redefined

The Equinoxe™ Shoulder System’s fractureshoulder reconstructs the patient’s anatomywith a patented anterior-lateral fin andasymmetric tuberosity beds that act as ascaffold to accurately position the greaterand lesser tuberosities.

The Equinoxe primary shoulder repro-duces the patient’s anatomy in situ with arobust scope for intra-operative flexibilityand a patented replicator plate that allow thesurgeon to accurately balance the gleno-humeral joint.

On Feb. 23, Exactech received 510(k)clearance for the Equinoxe ReverseShoulder System, adding another compo-nent to the comprehensive Equinoxe Shoulder System.

Exactech, Inc.Tel: 800-EXACTECH (800-392-2832)www.exac.com Enquiry No 26

TwoVu ST

A true innovation in two-portal arthroscopic fluid management, Cannuflow’sTwoVuTM ST outflow scope sheath delivers continuous fluid outflow for two-portal arthroscopic percutaneous shoulder procedures. It is also used forarthroscopic knee procedures, allowing the surgeon to move from a three-portal to a two-portal procedure. The patent-pending, soft polymer, low-pro-file device slips easily over an arthroscope’s own sheath to provide a dedi-cated inflow-outflow channel.

• Eliminates having to switch from inflow to outflow on the scope toremove debris and regain image clarity (even with a pump).

• Continuous outflow maintains excellent visual clarity and joint disten-sion throughout a procedure.

• Large fenestrations facilitate evacuation of even sizable particulates. • Reduces potential for damaging fluid temperature build-up (above

45°C) in the joint when using RF devices. • Insulates the metal scope sheath, preventing interference with RF

ablation or thermal remodeling devices.• Uses either gravity,

suction or pump• Proven in thousands

of cases.

Variety of configurationsavailable to fit over widerange of scope sheath sizes.

CannuflowTel: 866-484-5400 www.cannuflow.comEnquiry No 25

Aequalis® Resurfacing Head

The Aequalis Resurfacing Head allows sur-geons to restore the normal joint mechanicsand stability of the shoulder with minimalbone resection, preserving precious humeralbone stock for the future. This conservativeapproach of resurfacing requires replacingthe diseased humeral head surface for highdemand patients with early stage avascularnecrosis or glenohumeral joint disease.

TORNIER, Inc.Tel: 888-867-6437www.tornier-us.comEnquiry No 28


DryVu Fluid Shield

Another of Cannuflow’s growing line of arthroscopic fluid managementdevices, the easy to use DryVuTM fluid shield helps eliminate camera fog-ging caused by escaping fluid flooding the camera junction during arthro-scopic procedures. Constructed to slip easily and conveniently over a widerange of scope sheath sizes, the patented device is designed to continuallydeflect fluid away from the camera/coupler interface.

• Maintains consistent visibility without procedure interruption. • Reduces OR preparation time and the risk of contamination with

defogging agents.• Redirects fluid into a collection drape for easy clean-up and room

turn-over. • Constructed to slip easily and conveniently over a wide range of

scope sheath sizes (2.5 mm to 6mm OD). • Also fits any other instrument (e.g., shaver, grasper, etc.) where you

would like to divert squirting fluids.• Easily affordable solution.

Cannuflow Tel: 866-484-5400 www.cannuflow.comEnquiry No 27

Upper Extremity



NaviPro™ Image- Free® ShoulderNavigation

Computer-assisted technologies can improveimplant alignment in hip and knee arthroplasty.Like hip and knee arthroplasty, successfulshoulder arthroplasty depends primarily onproper technique, because incorrect glenoidand humeral component orientation can lead topremature wear, loosening and suboptimalfunction. The NaviPro system trackers are min-imally invasive and can be safely and securelyattached to the humerus and scapula, withoutdamage to bony or neurovascular structures.Because no established guidelines exist in theliterature for placement and orientation ofshoulder implant components, this system pro-vides the shoulder surgeon, for the first time,with a safe and effective intra-operative tool foraccurately performing shoulder arthroplastyand documenting its results.

Features and Benefits of the NaviPro ShoulderSystem:

• Affordable - One-third the cost of competitive systems• User-Friendly - Concise and clear user interface• Image-Free™ - No CT, fluoroscopic or pre-operative planning

requirements• Universal - Navigates shoulder implants from any manufacturer• Documentation - Document intra-operative data and correlate to out-

comes• Passive Tracking - No additional wires or cords in the operative

field• Reliable - Patented Tracker-Check technology ensures reliability

Kinamed, Inc.Tel: 805-384-2748www.kinamed.comEnquiry No 29


Zimmer Launches Biological RotatorCuff Repair Product

Zimmer has launched aninnovative biologicalpatch for the repair ofrotator cuff injuries inthe shoulder. The under-lying technology wasdeveloped by TissueScience Laboratories plc(TSL) of the UnitedKingdom and is beingmarketed by Zimmer asthe Zimmer® CollagenRepair Patch. TheZimmer Collagen RepairPatch is a chemicallycrosslinked, acellularsheet of collagen/elastinthat is derived fromporcine dermis. It is adurable implant, highlyresistant to breakdown by enzymes in the body.

Zimmer believes the Zimmer Collagen Repair Patch offers severalpotential advantages compared to current products or treatments. For exam-ple, the Zimmer Collagen Repair Patch’s high resistance to collagenaseactivity and breakdown in the body promotes increased repair stabilitythroughout the healing process. The Zimmer Collagen Repair Patch alsooffers reduced inflammatory response characteristics within the body due toTSL’s proprietary processing technology. In addition, the Zimmer CollagenRepair Patch offers ease of use because the product is flexible and strongand can be stored at room temperature instead of requiring refrigeration andcan be used without the need for rehydration by the surgeon.

Zimmer, Inc.Tel: 800-348-2759www.zimmer.comEnquiry No 30

To see your products

listed within the

Product News and

Product Feature

sectionsemail your information to [email protected]



Study results suggest that implanting a small spacer between lumbar vertebrae during interspinousprocess decompression may be an effective treatment for spinal stenosis. The two-year study didnot compare the procedure to other surgical decompressive procedures or treatments for spinalstenosis, and did not provide adequate follow-up to determine how long the spacer device would last.

(Center for the Advancement of Health, 12/1/06)

Research indicates that meniscectomy may result in long-term reduced knee function due todecreased quadriceps strength.

(HealthDay News, 12/3/06)

Study results suggest that women with rheumatoid arthritis are much less likely than men toexperience remission of the disease.


Studies indicate that male smokers with knee osteoarthritis may experience greater cartilageloss and more severe pain than men who did not smoke.

(Mayo Clinic, 12/11/06)

According to a report by the U.S. Agency for Healthcare Research and Quality, U.S. hospitals spend~$10.0 billion for inpatient care of injured patients. Fractures (e.g. of the hip, leg, spine, etc.)top the list of injury hospitalizations, and account for ~1MM admissions a year.

(Healthcare Cost and Utilization Project, 12/11/06)

Study results reveal that long term use of popular anti-heartburn drugs may raise the risk of hipfractures in adults over the age of 50, possibly due to the drugs’ inhibition of calcium absorption.

(Reuters, 12/26/06)

Studies at Rush University Medical Center suggest that the pubic bone could become the newstandard for harvesting bone grafts for certain types of reconstructive surgery. Researchers found thatthe area could be easily reached through a small incision, and that minimal dissection of the soft tissuewas necessary to expose the pubic bone and collect the cancellous bone needed for grafting.

(The Journal of Craniofacial Surgery, November/December 2006)

FDA published its findings on bone growth stimulation, noting agreement with an FDA panel’srecommendation to retain noninvasive bone growth stimulators as a class III device. A final decision isexpected by mid- to late 2007.

(FDA.gov, 1/17/07; Wachovia Capital Markets, 1/18/07)

Study results suggest that repeating a bone mineral density scan after up to 8 years may providelittle additional benefit for predicting fractures among older postmenopausal women.

(Archives of Internal Medicine, 1/22/07)

Research conducted at McGill University in Montreal indicated that older adults who take selectiveserotonin reuptake inhibitors may have an increased risk of developing fragile bones.

(Reuters, 1/22/07)

Study results suggest that once elderly adults have sustained a fracture, no significant differenceexists between men and women in their risk for recurrent fracture.

(Journal of the American Medical Association, January 24/31, 2007)

Study findings, published in the 2/07 issue of Arthritis Care & Research, indicate that regularmoderate exercise does not affect the onset of adult knee osteoarthritis, even when the patientis obese. Even though such relatively out-of-shape individuals were already at a higher risk fordeveloping osteoarthritis, routine exercise did not contribute to or help reduce their overall risk.


Emerging Orthopaedic Technologies & Treatments

Bone Reduction Screw (ARC SURGICAL)

Cap 7.0mm MTP Resurfacing Hemi-ArthroplastyProsthesis

(ARTHROSURFACE)

Rigid Bone Plating System for CMF (BIOPLATE)

Total and Hemi Shoulder (DVO EXTREMITY SOLUTIONS)

Citadel Anterior Lumbar Plate (GLOBUS MEDICAL)

GSO Bone Fixation Fasteners (GOLD STANDARD ORTHOPAEDICS)

Inion CPS/OTPS Freedom Plate (INION)

Bone Plate and Bone Screw Systems, Dynamic HipScrew and Dynamic Condylar Screw

(INTAI TECHNOLOGY)

Humerus Locking Plate (NEWCLIP TECHNICS)

Osferion (OLYMPUS AMERICA)

Flexigrip Sternal Closure (PRAESIDIA)

VSPSPN Bone Cement (TECRES SPA)

Obelisc Vertebral Body Replacement (ULRICH)

Flosimple Arthroscopic Pump (WORLD OF MEDICINE)

FDA 510(k) Releasable Database12/06 and 01/07

Recent FDAClearancesIssued December 2006 and January 2007

FFUUTTUURREETTEECCHH



Ticker Track (Based on close of business, 1/31/07)

Ticker 52-Wk 52-Wk Chg vs. Chg vs. Company Symbol High Low Close Prior Mo. Prior Yr.

aap † AAQ 3.86 2.67 3.06 -3.5% 20.9%

Alphatec Holdings ATEC 8.80 2.77 4.25 13.9% N/A

ArthroCare ARTC 49.15 36.25 36.90 -7.6% -17.6%

Biomet BMET 42.52 30.22 42.36 2.6% 12.0%

BioMimetic Therapeutics BMTI 16.07 6.20 15.40 16.8% N/A

co.don AG † CNW 5.03 2.36 2.58 -16.8% -19.9%

ConMed CNMD 24.29 17.88 24.20 4.7% 2.4%

Corin Group †† CRG.L 6.69 3.81 6.26 11.0% 10.6%

curasan † CUR 4.08 1.98 3.39 3.4% 1.2%

Cytori Therapeutics † XMPA 9.45 4.12 5.67 -12.2% -21.8%

DJO Incorporated DJO 45.50 28.95 41.40 -3.3% 26.1%

Exactech EXAC 16.60 11.00 15.25 7.2% 32.3%

Hanger Ortho Group HGR 9.22 6.06 8.95 18.9% 32.0%

Inion †† IIN 1.44 0.37 0.52 8.3% -65.1%

IsoTis OrthoBiologics ‡ ISOT 11.75 10.81 11.19 N/A N/A

Kyphon KYPH 48.45 29.95 46.90 16.1% 12.8%

NuVasive NUVA 25.29 15.14 24.21 4.8% 31.6%

Orthofix OFIX 51.55 35.00 50.38 0.8% 17.4%

OrthoLogic OLGC 6.20 1.25 1.41 -1.4% -75.4%

ORTHOsoft ‡‡ OSH 0.71 0.25 0.60 -4.8% 20.0%

Orthovita VITA 5.05 3.20 3.50 -3.6% -23.7%

Osiris Therapeutics OSIR 29.29 9.84 23.23 -8.3% N/A

Osteotech OSTE 6.38 3.40 5.48 -3.0% 1.3%

ReGen Biologics RGBI 1.03 0.23 0.42 -16.0% -54.3%

Regeneration Technologies RTIX 8.24 4.87 5.75 -1.9% -27.2%

Smith & Nephew SNN 57.00 36.70 56.23 7.5% 12.5%

Stryker SYK 62.37 39.77 61.94 12.4% 24.1%

Symmetry Medical SMA 22.95 10.82 13.78 -0.4% -35.2%

Synthes ‡ SYST 132.40 102.79 125.98 6.8% 5.9%

Wright Medical Group WMGI 25.09 18.54 21.89 -6.0% -1.9%

Zimmer Holdings ZMH 85.00 52.20 84.22 7.5% 22.1%

†Converted from Euro to USD; 1€ = 1.2936 USD.††Converted from British Pound to USD; 1£ = 1.9335 USD.‡Converted from Swiss Franc to USD, 1CHF = 0.8021 USD.‡‡Converted from Canadian to USD; 1CDN = 0.8504 USD.

In order for a company to qualify for inclusion in the OrthoInvestor Update, orthopaedics must represent

at least 60% of its revenues.

Company Financials†

2006 vs 2005

Company Sales vs.Ticker Symbol ($MM) Prior

DePuy $4,105.0 +7%U.S. $2,532.0 +7%Ex-U.S. $1,573.0 +7%

Globus Medical $82.0 +88%

Kyphon $407.8 +33%U.S. $324.1 +26%Ex-U.S. $83.6 +72%

Stryker $5,405.6 +11%U.S. $3,556.8 +12%Ex-U.S. $1,848.8 +9%

Implants $3,110.1 10%MedSurg $2,037.1 +16%Phys Therapy $258.4 -2%

Zimmer $3,495.0 +7%Americas $2,076.0 +7%Europe $931.0 +6%Asia Pacific $488.0 +7%

Recon $2,907.0 +7%Hips $1,189.0 +5%Knees $1,462.0 +7%Extremities $77.0 +17%Dental $179.0 +20%

Trauma $195.0 +9%Spine $177.0 +11%Ortho Surgical $216.0 -3%

†Orthopaedic product sales only.Constant currency.

Company news releases1/07

OORRTTHHOOIINNVVEESSTTOORR UUPPDDAATTEE



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Today, most manufacturers of surgical power tools adequately meet theperformance requirements expected by surgeons in large bone, recon-structive surgery, trauma and sports medicine procedures. But as newindustry players enter the U.S. power tool market, the focus is movingtoward technological advances in areas such as ergonomics, motors andbatteries, and the interchangeability of handpieces, power sources andattachments. In this context of change, new benefits that arise are notalways widely known, hence this review.

In a previous issue of this journal, Dr. E. Marlowe Goble, M.D. spoke ofthe “rhythm” that a surgeon develops to help him move through a procedure.(See “Surgeon Interview: E. Marlowe Goble, M.D.,” U.S. OrthopaedicProduct News, November/December 2006.) The characteristics of the powertools used by the surgeon are crucial to achieving that rhythm. The latest gen-eration of power tools to be available in the U.S. offers greater precision andaccuracy than ever before, and a wealth of other features which enhance theirease of use and value to surgeon and hospital alike. This article provides aconvenient review of these factors, to help practitioners to choose the powertool range that most closely fits their needs.

Less Weight, More PowerHow power tools feel in the hand and how they perform are key

aspects of their usefulness. Tool manufacturers therefore need to devoteparticular attention to the design and actual shape of their power tools, sothat they function as a natural extension of the hand. But power is impor-tant too, among other considerations to ensure that operating speed ismaintained under all conditions. The ideal tool design would combineweight reduction with increased power, a requirement that represents aconsiderable challenge to manufacturers’ ingenuity.

Yet the latest generation of power tool technology to become availablein the U.S. does indeed offer smaller, lighter and more compact tools thatvirtually eliminate fatigue in use, with additional power to enable the sur-geon to operate with greater precision, particularly in restricted areas. Thischaracteristic enhances their compatibility both with minimally invasivesurgery and with more demanding procedures such as hip resurfacing.

VersatilityA significant factor in the overall usefulness of power tools is reduc-

tion of the number of tools needed to perform the usual procedures.Traditional tool manufacturers offer a range of separate drilling, reaming,sawing and wire driving tools, while other manufacturers have opted fora more modern, simplified approach, offering the ability to drill, saw orream with the same handpiece – for all types of bone work, includinglarge bones.

With this universal approach, only the attachment needs to bechanged. Products of this kind typically feature a time-saving, quick-release, quick-fit mechanism. Moreover, since different surgeons may continued on page 23

New Advances in Power Tool Technology

Author: Jacques R. Essinger, Ph.D.

have their own power source preferences for the tools they use (ACpower, battery or compressed air), a further technical plus is the abilityto use any attachment with any handpiece, whatever the power source,although not many manufacturers offer this degree of flexibility.

Simpler Administration and Lower CostsA further benefit of the universal handpiece with interchangeable

attachments lies in inventory management, and will be of particular inter-est to the administrator. A single, universal handset with interchangeableattachments can replace several separate devices. Therefore, fewer itemsof equipment (including batteries) need to be purchased, thus reducinginvestment and inventory costs, battery charging routines and mainte-nance requirements. It may be prudent to invest in back-up machines, buthere again, adopting a universal system brings the number of devices tobe purchased and managed down to one single handpiece.

Sterilization can be a threat to battery life. To combat this, the latesttrend is to provide drop-in batteries which are inserted under sterile condi-tions into a sterilizable battery box. In aseptic transfer systems of this kind,only the battery box needs to be sterilized in the autoclave. However, notall manufacturers offer this valuable money- and time-saving feature.

Electric MotorsA key area of technological change concerns tool motors, in which

manufacturers’ research and development efforts have recently broughtabout some particularly interesting technological advances. Most toolsare powered by 9.6 to 12-volt direct-current electric motors, but a newgeneration of much more powerful, 18-volt devices is now available.

The earliest models used motors with carbon brushes. This relativelyprimitive technology was not always reliable and did not perform effi-ciently. Its successor was the brushless motor, a technology that replacedthe purely mechanical contact between carbon brushes and commutatorwith an electronic system for breaking up the direct current into tinyimpulses. These brushless motors were equipped with Hall sensors toadjust speed, but these are delicate components with many wires and sol-dered joints which have proved fragile, especially when sterilized in anautoclave. The most advanced form of motor now beginning to be usedin orthopaedic power tools is the brushless, sensorless, fully electronical-ly-controlled motor. This new technology enables a significant increaseof the power available, combined with a finer degree of user control andimproved reliability.

Battery TechnologiesThe largest share of the tool market is now represented by battery-

powered instruments. The rechargeable battery technologies traditionally



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used for surgical power tools are the same as those employed in manyother non-clinical applications. First, the nickel-cadmium or NiCd bat-tery, invented as long ago as 1899, followed in 1983 by the nickel-metalhydride (NiMH) battery, and around 1990 by the lithium-ion battery.

One of the prime criteria for judging the value of a battery technolo-gy is its energy-to-weight ratio, or energy density. NiCd batteries achievethe lowest energy density while lithium-ion the highest. (See Exhibit 1.)

A further consideration is memory effect, or a battery’s tendency tolose capacity if it has not been fully discharged before it is recharged, aproblem which is completely eliminated by lithium-ion technology.

Exhibit 1. Graph of energy densities (Wh/kg) for different batteries.Lithium-ion battery technologies have over three times the energy density of NiCd batteries, without the drawbacks of the NiCd’s memoryeffect.

Surgical power tools are therefore best powered by lithium-ion batter-ies, which over the years have proved beyond a doubt their superior ener-gy density, low maintenance needs and the freedom they give to rechargethem at any time. Lithium-ion technology is now used in many medicalapplications, and is recognized as being completely safe. It has alsoenabled an increase of the battery voltage to 18 volts, and thus improve-ments in motor power and efficiency, and elimination of the risk ofstalling even in the most demanding conditions.

In cases where no charged battery is available during a procedure, itis of course desirable to be able to quickly connect an AC power cordwith a step-down transformer and rectifier to the battery-powered hand-piece. Some manufacturers offer this facility.

Pneumatic MotorsAround 25 percent of the power tools used in the U.S. are pneumati-

cally powered. These have proved popular, as they are easily connectedto the hospital’s compressed air network or, in many surgical centers, toa tank. But traditional designs of pneumatically-powered tools sufferedfrom various weaknesses. The technology has evolved little in recentyears, and until now, pneumatically-powered tools have tended to benoisy and heavy on maintenance. Users of these tools should look out forthe innovations in the pneumatic motor mechanism now coming to themarket, offering reduced noise and maintenance needs, enhanced relia-bility and lower incidence of breakdowns.

Pneumatic motors consist of a cylindrical core which rotates within achamber by the action of the compressed air on vanes protruding fromthe core. In the most modern pneumatically-powered tools, noise andwear are reduced in two ways. First, by siting the motor immediatelybehind the chuck, in the upper part of the handpiece. The position adopt-ed in earlier models was in the handle, approximately at right angles tothe direction of thrust, a design which required the inclusion of a systemof gears. This increased both the noise level and opportunities for wear,and consequently represented a greater risk of frequent maintenancebeing required. Placing the motor in the upper part of the handpiece, inline with the chuck, obviates the need for gears, reducing noise levels andincreasing tool reliability. Further noise reduction can be achieved byplacing phonic insulation materials in the space thus freed up in the han-dle of the tool. Exhibit 2 shows an illustration of this type of design.

Exhibit 2. Sectionthrough a pneumatichandpiece with in-linemotor. In-line position-ing of the pneumaticmotor reduces noise andwear, yet still enablescannulated drilling.

Additionally, the most advanced manufacturers of modern pneumati-cally-powered tools have implemented ways of reducing motor wear andnoise by choosing a ceramic material for the chamber in which the rotormoves, and a fiber-reinforced, self-lubricating compound for the mobilecomponents. The effects of this are to eliminate the need for lubrication,and to offer pneumatic tools that are lighter in weight, easier to handle,virtually silent and maintenance-free.

Experience, Vision and InnovationAlthough the technologies employed at the “cutting edge” of

orthopaedic power tools are largely stabilized, considerable advanceshave been made in the areas of ergonomics, motors and batteries. Thisarticle recommends readers to evaluate manufacturers’ offerings againsteach of these technological advances. By incorporating these advancesinto the design of their products, manufacturers of the most advancedtools continue to show how their experience, vision and flair for innova-tion can make a significant contribution to the orthopaedic surgeon’s pro-fessional excellence.

Jacques R. Essinger, Ph.D. has over 20 years of experience as entrepre-neur and manager in orthopaedic companies. He founded Symbios, aSwiss implant company, and later joined Modex shortly after inception,which is now IsoTis, a public company focusing on bone substitutes. Dr.Essinger has also performed consulting for several orthopaedic compa-nies in the power instrument area. He can be reached [email protected].

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Enquiry No 31



Do you really know how a Directors and Officers (D&O) insurance pol-icy works? If you sit on the board of an orthopaedic device company,invest in one or own one, you may want to investigate the exact type ofmanagement liability protection that exists because the policy, oftenreferred to as D&O, may not respond in the way you might expect.

Board Member Liability

All policies are not created equalWhen considering a D&O policy, ask the following questions: 1. Who defends you in a lawsuit? Can you use your own attorney? Do

you WANT to use your own attorney? 2. Who has access to coverage first? 3. How do the limits work? Is the limit of liability an aggregate

amount, or provided to each director or officer? 4. How does your policy respond to alleged Patent Infringement? 5. Does your policy include Employment Practices? Who is covered? 6. Is there a “major shareholder” exclusion? 7. What happens if the company runs out of money or goes bankrupt

– how can you protect yourself then?

Questions 1, 3 and 7 are the most frequently asked. It’s important tounderstand how the policy will react BEFORE a loss occurs, and notafter.

The big pictureLet’s take a few more minutes to understand what D&O really is. The

main components of D&O coverage are:• Management Liability for the Directors and Officers (“funds” the

indemnity provision in the articles of incorporation). The corpora-tion has agreed to defend your actions as a Board Member.

• Employment Practices may be included (i.e., wrongful termination,discrimination, etc.).

• Coverage for the entity itself. • Some forms may offer an additional “portfolio” of coverages,

including Fiduciary Liability (unlimited liability of the individualsresponsible for providing certain employee benefit plans) andCrime (employee theft).

What are the most common areas from which claims arise?Employee claims, mergers and acquisitions, vendors, customers or

competitors, regulators, stockholders or investors.Claims from government and regulatory agencies can create sizeable

defense costs, even if it is found that no wrongdoing has been commit-

ted. Subject to certain exclusions, there may very well be coverage forthese kinds of allegations.

What should you do to protect yourself?1. Many insurance carriers have “loss prevention handbooks.” In addi-

tion, an experienced insurance broker can recommend best prac-tices and other proactive ways to avoid litigation.

2. Determine what can most hurt you, and have the policy designedaround those exposures.

3. Review corporate bylaws so that they clearly outline the duties andresponsibilities of your directors and officers to take advantage ofthe maximum available protection provided under indemnitystatutes.

Why should Employment Practices Liability be considered?The Family and Medical Leave Act, The Americans with Disabilities

Act, amendments to Title VII of the Civil Rights Act of 1964 and otherlegislation have broadened potential employer liability exponentially.In addition, the Equal Employment Opportunity Commission (EEOC)recently reported that employees filed 81,293 charges of discriminationnationwide in 2003. Discrimination complaints remain at the secondhighest level since 1996. The EEOC reported that most charges con-cerned race discrimination (35.1 percent) followed by sex discrimination(30 percent).And how about one more? A recent Michigan case determined evidenceof discrimination based on an employee’s marital status!

How do you know what limits to buy? The million dollar question! On the public company side, the average

securities class action suit is now more than $13 million. For privately-held companies, defense costs alone can run more than $500,000. Manyfactors impact the evaluation of a company when assessing what limitsare “enough.” Factors include:

1. What are other companies doing? How do we find the benchmarksfor my industry?

2. Is this a start-up company, or a “seasoned” one that already providesa product or service?

3. What is the company’s current financial picture?4. Is the company in a “high growth” mode?5. Is any merger, acquisition or downsizing planned?6. Will there be activity in private placements or secondary offerings?

(Watch out for those major shareholder exclusions!)

Liability Protection Clauses: theIns and Outs of D&O Coverage

Author: Michael Cremeans


AARRTTIICCLLEE


AARRTTIICCLLEE

7. Who provides the major investment in the company-private individ-uals, venture capitalists?

How do you buy a D&O policy for your company?The D&O policy for a start-up “LLC” will not be the same as that for

a high-growth private company contemplating an initial public offer.Many different policy forms exist, and knowing how to differentiatebetween them to select the right one requires some homework.

Now let’s examine some considerations if you are a venture capitalcompany or investor.

• The management of a private equity fund creates a unique risk profile.• Potential claims alleging the mismanagement of capital.• Potentials for a conflict of interest – the investor may have a duty

to the fund and portfolio companies.• Exposures arising from serving on outside board positions. • Claims brought by a Portfolio Company alleging a failure to

fund.• Claims brought by a Portfolio Company, its shareholders and/or

creditors.• Potential “Scientific Advisory Role”• MYTH – Limited Partners never sue!

• When designing a policy, it’s crucial to analyze what activities areinsured, provisions governing the outside directorship liability provi-sion, the applicability of the contract exclusion and if the policyincludes an intellectual property exclusion.

• Professional services coverage is a key component of a wellnegotiated private equity policy – the coverage should includethe Insured’s investing activity and services provided to aPortfolio Company.

• The breadth of contract exclusion can be particularity problemat-ic. For instance, a portfolio company’s founding shareholderscould claim that the Insureds failed to provide capital pursuant toa financing agreement.

• Care must be taken to ensure that an intellectual property exclu-sion is not incorporated into the policy. An intellectual propertyexclusion can be particularity restrictive for a firm that engagesin private equity investing.

• Outside Directorship Liability (ODL) is a key component of anywell negotiated private equity policy. The Insuring Clauseextends coverage to an Insured Person who occupies a board seator executive position on a portfolio company at the request anddirection of the Insured Organization. Coverage responds on adouble excess basis.

Take the time to discuss these issues with experienced managementliability specialists. We recommend that you form a team of individualsthat includes legal counsel and an experienced D&O insurance broker.

Michael Cremeans is a Senior Vice President with Britton-Gallagher &Associates, Inc., a privately owned, independent insurance brokerage.The firm specializes in developing insurance and risk management solu-tions for orthopaedic and other medical device companies. He can bereached at 440-264-2703 or [email protected].

The author wishes to extend special thanks to Steve Zashin of Zashin &Rich Co., L.P.A. for his assistance in preparation of this article.


Enquiry No 32


AARRTTIICCLLEE

Improved Technology of TissueStabilization for Joint Repair andReconstruction

Author: R. Thomas Grotz, M.D.

A normal person takes 10,000 steps per day, or two to four million stepsper year. In light of this, having a joint that is “almost right” is like hav-ing a piston that almost fits a cylinder. When tissue is reattached to bonewith currently used techniques, it starts out 100 percent as strong as priorto injury, dropping to 40 percent attachment force of tissue to bone bythree to fourweeks per the healing curve, gaining strength to 70 percentattachment force by six weeks after surgical repair and 85 percent by 12weeks, though not fully healing to 100 percent until one year after repairor reconstruction. Repair is the fixation of tissue to itself when the injuryallows components to be reconnected; reconstruction refers to injuriesthat demand replacement by one’s own tissues (autograft), cadavericreplacement of damaged tissues (allograft) or another species replace-ment use (xenograft)…or even stints that could be artificial tendon (mus-cle to bone) or ligament (bone to bone) substitutes.

The current marketplace enabling orthopaedic cures is less than ideal,as equipment devices and implants lack full force attachment capabilitiesuntil one year after injury and fixation; this is why people require crutch-es, slings, braces and downtime from work or sport. Most sutures breakat less than 30 pounds force, while suture anchors tend to pull out at 42pounds or less. Even interference screws pull out at 200 to 300 poundsforce after anterior cruciate ligament (ACL) reconstruction (800 to 1,200Newtons). These numbers are relevant given the forces drawn by naturalligaments such as the ACL which draws 25 pounds forces on a levelplane, 100 pounds down a ramp and 400 pounds to rupture. Thesupraspinatus also ruptures at 400 pounds force.

The less than optimal nature of available technologies lead our teamto develop The Stabilizer platform technology for human joints.

Since the Stabilizer for Human Joints has a pull out force of 600pounds, it has the potential to allow earlier mobilization after injury andrepair or reconstruction—and it is FDA-cleared for these opportunities atthe shoulder, elbow, knee and ankle. Although successfully implanted intofour patients with an excellent result after Investigational DeviceExemption study and Institutional Review Board approval, the Stabilizerawaits pecuniary support to facilitate the prototype to production pathway.

The basic principles set forth in this soft tissue to bone fixation inventionfor extremities are each protected by separate patents – one for the device,the other for the method of surgery. The device patent has numerous detailsfollowing trials and errors, including a dozen prototype revisions. Themethod of surgery patent allows for skewering the tissue to be fixed anddriving it through the joint toward a predrilled bone hole. No other anchor-ing device enables this opportunity. The holes into which tissue is deposit-ed per se are tighter than with routine orthopaedic procedures, since theStabilizer drills have a V-shaped zero rake that spreads bone around insidethe hole during the drilling process as opposed to the “barber pole” spiralusual orthopaedic drills that waste bone debris after drilling, spreading itthroughout the joint (requiring washout during the procedure for clear post-surgical joint fields). The Stabilizer gathers and directs the tissue to be

repaired or reconstructed and places it beneath the bony cortex, then spreadsit into the entire hole periphery, obtaining 360° of bone/nutrient/oxygenat-ed blood/soft tissue contact. This is in contradistinction to the interferencescrew that presses the reconstructed ligaments into half or 180 degrees ofthe weaker bone hole depot, as shown on histologic studies.

The Stabilizer implant in closed and open positions appears in Exhibit 1.

Exhibit 1. The Stabilizer implant in closed and open positions is illustrat-ed before and after central plug deployment.

The design and performance characteristics of the Stabilizer – itsimmediate, sutureless fixation of tissue to bone—make it particularlysuitable for use in arthroscopic shoulder repair and ACL repair (asopposed to reconstruction). The straightforward delivery and fixationwill make for faster procedures and more rapid rehabilitation.

Exact design aspects are calculated to match joint force, tissue andsize requirements. An advanced implant position allows for removalwhen prongs collapse.

The Stabilizer is also a much more stable fixation principle and prac-tice, as compared to suture anchors that hold tissue on top of the slipperybone surfaces as healing is initiated. Although the Stabilizer was createdas a sutureless anchor, it can carry up to six sutures beneath its prongs,allowing capsular reefing. Often multiple suture anchors are required toaccomplish soft tissue attachment; in contrast, only one Stabilizer is need-ed for most surgeries with the option to add extra sutures. If removal ofthe implants were warranted for any reason, the Stabilizer’s toothedprongs can be collapsed and the implant delicately extracted. Sutureanchors, on the other hand, may need to be “hacked out” with osteotomes,thus destroying the site for additional reconstructive opportunities.

The Stabilizer platform technology has been expanded to other surgicalapplications including the spine, and a corporate entity, Innvotec Surgical,Inc., (ISI) has been organized to manage the assets. ISI currently seeks fund-ing and development partners for several of its technologies. These includebut are not limited to the Stabilizer for Human Joints, as well as expanding(hydraulic and otherwise) immediate fixating spine fusion and motionpreservation cages, and joint cushioning devices under development.

R. Thomas Grotz, M.D., is Founder, Chief Executive Officer and Directorof Innvotec Surgical, Inc., and is in private orthopaedic practice in SanFrancisco, California. He can be reached at [email protected].

Enquiry No 33



Enquiry No 9



Increasingly, medical device companies that manufacture or distributeimplantable medical devices are creating passive investment vehicles todistribute profits to surgeons who implant such devices in patients. Whilethe structure of these arrangements may differ from company to compa-ny, a common element is that investment opportunities and the resultingfinancial rewards are often being offered to surgeons because surgeonsselect the products. The resulting financial incentives are virtually invisi-ble to patients, although they can clearly affect the treatment patientsreceive. These financial incentives pose serious compliance risks forphysicians who invest in these types of companies. Moreover, hospitalsand other facilities that do business with these companies because they areowned by referring physicians incur a substantial risk of violating the law.

The Advanced Medical Technology Association (AdvaMed), thetrade association that represents many companies in the medical deviceindustry, recently asked the HHS Office of Inspector General (OIG) tocomment on these physician ownership schemes. In response, the OIGstated that “[g]iven the strong potential for improper inducementsbetween and among the physician investors, [medical device and distri-bution] entities, device vendors, and device purchasers,” the OIGbelieves these types of ventures “should be closely scrutinized under thefraud and abuse laws.” See Letter from Vicki L. Robinson, Chief,Industry Guidance Branch, OIG, to Stephen J. Ubl, President and ChiefExecutive Officer, AdvaMed (Oct. 6, 2006).

The proliferation of surgeon-owned device companies is problematicfor obvious reasons. What patient wants his or her surgeon to decidebetween a product from which the surgeon makes no money, and a prod-uct sold by the surgeon’s own company? What patient wants his or herhospital to feel compelled to do business with a device manufacturerowned by physicians who send it business? When a surgeon who profitsfrom every use of a particular medical device is faced with a decisionwhether to select that device, a competing device, or perhaps no deviceat all, the surgeon’s financial interests may influence, and possibly cor-rupt, the treatment decision.

The typical genesis and structure of these arrangements is as follows:A small group of founders, who may or may not themselves be physi-cians, establish a company to manufacture or distribute medical devicesfor implantation in orthopedic surgeries. The company might be organ-ized to manufacture what are essentially copycat devices based ondesigns that are already on the market. The operators of the companythen seek investors in the company, limiting their search to surgeons whocan generate referrals that benefit the company. These surgeons areoffered “limited partnerships” or similar ownership interests in the com-pany in return for relatively small amounts of money, and can earn continued on page 30

Surgeon-Owned Device Companies: A Risky Proposition

Author: Eugene E. Elder

returns far higher than the returns they could earn through traditionalinvestment vehicles.

After the surgeons invest in the company, they are inclined to choosetheir own company’s devices rather than the devices they previouslychose on their patients’ behalf. However, because it is hospitals or otherfacilities that purchase the devices to be implanted in patients, physician-owned companies must solicit these facilities for their business. In thisway, inappropriate financial incentives spread from the physician-ownedcompany to the facilities with which they do business. Obviously, whena hospital agrees to do business with a company owned by its referringphysicians, one of its reasons for doing so is to “keep the physicianshappy,” i.e., to accede to the physicians’ business proposition in order toretain the physicians’ stream of referrals.

Surgeons who are passive owners of device companies whose prod-ucts they implant, and hospitals who do business with such companies,have clear conflicts of interest. These conflicts can only lead to increasedcosts, reduced innovation, and lower quality. Unlike traditional surgeoncollaboration with medical device companies, where the surgeon mayactively direct or aid in developing or designing new technologies, thecurrent proliferation of surgeon-owned device companies is often basedon distributing passive revenues to a large number of surgeons who havenot contributed to development of the product; they simply prescribe itsuse, and choose to perform the procedures at hospitals that agree to pur-chase from their companies. This structure means that the surgeons havedirect financial incentives to over-utilize their own company’s existingdevices, and disincentives to funding research and development or tousing innovative technologies that may be best for patients.

The Anti-Kickback Statute. Federal laws exist to protect patientsfrom these financial conflicts of interest. The most significant of theselaws are the federal Anti-Kickback Statute and the Stark Law (addressedbelow).1 The Anti-Kickback Statute makes it a felony for anyone to“knowingly and willfully” solicit, receive, offer or pay “remuneration” inany form to induce, or in return for, referring, selecting, or even just rec-ommending, a particular product payable by a federal healthcare pro-gram.2 Under this statute, it is a federal felony for a hospital to do busi-ness with a physician-owned company in return for the physicians’Medicare or Medicaid referrals, or for a device manufacturer to pay asurgeon to select its products for any Medicare or Medicaid patient.

The broad prohibition of the federal statute clearly extends to hospi-tal decisions to do business with physician-owned companies. The gov-

The following article was originally published by the Washington Legal Foundation (Legal Backgrounder, Vol. 22 No. 4, January 26, 2007),and is reprinted here with their permission.



Enquiry No 10






ernment defines prohibited remuneration to include kickbacks, bribes,rebates, or “any other exchanges of value made directly or indirectly,overtly or covertly, in cash or in kind.”3 Moreover, the government hastaken a clear stand on its interpretation of the statute. Known in theindustry as the “one-purpose” test, the government’s position is that evenif only one purpose behind the remuneration is to induce referrals, thestatute is violated.4 Thus, even in situations where a hospital purchasesdevices from a physician-owned company that it would otherwise pur-chase from an independent company, and even if it pays the physician-owned company less for such products than it would otherwise pay, thehospital would still risk prosecution under the Anti-Kickback Statutebecause one purpose of delivering business to the physician-owned com-pany is clearly to induce the physicians to refer business to the hospital.Stated conversely, because one purpose of the arrangement is to preventthe physician owners from taking their referrals elsewhere, the hospitalis subject to prosecution under the Anti-Kickback statute.

Apart from the physician-owned companies’ relationships with hospi-tal customers, however, the relationship between such companies andtheir physician owners also poses a substantial compliance risk for thephysicians. Driven by the Anti-Kickback Statute, the government haslong believed and publicly stated that many physician ownershiparrangements are suspect because such arrangements may be a methodfor rewarding physicians for generating referrals. In 1989, the OIGissued a Special Fraud Alert voicing its concern about the proliferation ofsuch problematic joint ventures. The OIG described them as follows:

Under these suspect joint ventures, physicians may becomeinvestors in a newly formed joint venture entity. The investorsrefer their patients to this new entity, and are paid by the entity inthe form of ‘profit distributions.’ These suspect joint venturesmay be intended not so much to raise investment capital legiti-mately to start a business, but to lock up a stream of referralsfrom the physician investors and to compensate them indirectlyfor these referrals.5

The OIG went on to describe features of such arrangements that arelikely to indicate a violation of the Anti-Kickback Statute. The primaryfeature identified as suspect by the OIG was whether “investors are cho-sen because they are in a position to make referrals.”6 Rather than avoid-ing this highly suspect feature as indicative of an illegal intent, many sur-geon-owned device companies instead embrace it as the foundation oftheir corporate strategy.

Investment Interests Safe Harbor. Because the government inter-prets the Anti-Kickback Statute so broadly, industry participants askedfor clear guidance on types of arrangements involving potential referralsources that are permissible. In response, Congress and the OIG issuedstatutory and regulatory anti-kickback “safe harbors,” which describecriteria for various arrangements that, if met, protect the arrangementsfrom prosecution. Although failure to comply with a safe harbor’s crite-ria does not necessarily mean that an arrangement violates the statute, itdoes mean that it should be scrutinized to determine the intent behind anyremuneration that changes hands between the participants. As might bepredicted, the typical surgeon-owned device manufacturer arrangementdoes not comply with the terms of the safe harbor that the OIG has estab-lished for investment interests.

One of the requirements of the investment interests safe harbor is thatno more than 40% of the ownership of the entity can be held by individ-uals in a position to make referrals to, generate business for, or furnishservices to the entity.7 By contrast, a typical surgeon-owned device man-

ufacturer may be 100% owned by surgeons and the company’s own man-agers. In other words, all or virtually all of the investors in such compa-nies are typically “tainted.”

Another requirement of the safe harbor is that no more than 40% of anentity’s gross revenue can come from referrals or business otherwise gener-ated from investors.8 By contrast, many surgeon-owned device companiesdepend on investor referrals for virtually all of their business, and would notbe able to survive if they prohibited such referrals and relied solely on qual-ity, price, or other legitimate factors to promote their products.

The most significant requirements of the safe harbor, however, andthe requirements that provide the most insight into the purpose of aninvestment interest, concern the terms upon which investments interestsare offered to potential referral sources. The safe harbor requires thatinvestment terms offered to potential referral sources be no differentfrom investment terms offered to other investors, and that investmentterms not be based on the expected volume or value of referrals from aninvestor.9 The typical surgeon-owned device company not only ignoresthese requirements, but acts directly contrary to their purpose by offeringinvestment terms only to individuals who are surgeons in a position togenerate referrals for the company. In these circumstances, the entity’sinvestment terms are based completely on whether the investor is in aposition to refer business to the company. In short, rather than attempt-ing to comply with the government’s safe harbor for ownership interests,these companies act directly contrary to the criteria of the safe harbor,and as a result, run a significant risk of prosecution.

Under the Anti-Kickback Statute, therefore, when a physician-owneddevice company operates with the purposes of rewarding physiciansfinancially for referrals to the company, and inducing business from hos-pitals and other facilities by controlling physician referrals to these enti-ties, such a company is pursuing a business plan that violates federal law.

The Stark Law. Physician ownership of medical device companiesalso implicates the federal ban on physician self-referrals, known as theStark Law.10 In the 1990s, increasing concerns about physician conflictsof interest led to the enactment of this law, which prohibits physiciansfrom referring certain types of “designated health services” payable byMedicare or Medicaid to entities in which they have an investment inter-est or with which they have another financial relationship. The purposeof the Stark Law is to create a bright line, “strict liability,” prohibitionagainst physicians having financial relationships with the health carefacilities to which they refer Medicare or Medicaid patients. Therefore,regardless of the intent of the parties, if a referral does not comply withthe Stark Law, any designated health services performed pursuant to thatreferral are not payable by Medicare, and any Medicare payments thatare received as a result of a prohibited referral constitute overpayments.In this way, a referral that violates the Stark Law results in an overpay-ment that potentially violates the False Claims Act, potentially resultingin whistleblower lawsuits, treble damages, substantial per-claim penal-ties, and even exclusion from the Medicare and Medicaid programs.

With regard to physician-owned device companies, the risk of violat-ing the Stark Law is greater than many physicians and hospitals appearto believe. For example, some physicians apparently have a misconcep-tion that implantable devices do not fall within the definition of “desig-nated health services” to which the Stark Law applies. On the contrary,however, CMS has clearly indicated that medical devices implanted aspart of inpatient or outpatient hospital services do in fact constitute des-ignated health services under the Stark Law.11

Some hospitals and physicians also apparently believe that their rela-tionships with hospitals qualify for exceptions under the Stark Lawapplicable to direct or indirect compensation arrangements. It is unlike-




ly, however, that these exceptions are being met. If a hospital agrees todo business with a company only because it is owned by referring physi-cians, the prices it pays, regardless of their level, cannot truly be seen asfair market value, in that the hospital would not purchase the devices atany price but for the physicians’ referrals. In addition, both compensationexceptions require compliance with the Anti-Kickback Statute. As dis-cussed above, the typical relationship between a hospital and a physi-cian-owned device does not appear to meet this test.

Conclusion. It appears that many device companies and physiciansare creating formal business arrangements that can only be viewed aselaborate ways to funnel money to physicians for choosing particularproducts. Paying surgeons to select particular products violates federallaw and the laws of most states, whether the payments are cash slippedunder the table or dividends issued to surgeon shareholders. For this rea-son, the government has repeatedly warned that these types of arrange-ments are usually illegal. Nonetheless, companies and surgeons continueto pursue them. The physicians, hospitals, and other facilities involved insuch arrangements, and the professionals who advise them, should rec-ognize the near impossibility of divorcing the referral motives inherent

in these investment offerings from the business relationships amongthese companies, their hospital customers, and their physician owners,and the resulting likelihood that they are violating federal law.

Eugene E. Elder is a partner in the law firm Akin Gump Strauss Hauer& Feld LLP in its Washington, D.C. office.

References1 42 U.S.C. § 1320a-7b(b); § 1395nn.2 Id.3 See 42 U.S.C. § 1320a-7b(b).4 United States v. Kats, 871 F.2d 105 (9th Cir. 1989); see also United States v.Greber, 760 F.2d 68 (3d Cir. 1985), cert denied, 474 U.S. 988 (1985).5 Office of the Inspector General, Special Fraud Alert: Joint VentureArrangements (Aug. 1989), reprinted in 59 Fed. Reg. 65,372, 65,374 (Dec. 19,1994).6 Id.7 42 C.F.R. § 1001.952(a)(2).8 Id.9 Id.10 42 U.S.C. § 1395nn.11 See 66 Fed. Reg. 856, 934 (Jan. 4, 2001)


Enquiry No 34

Enquiry No 11



How blessed I have been to spend the majority of my career in theorthopaedic industry. When I started in 1980, the environment was certain-ly different in the business of orthopaedics, surgical techniques and evensurgical procedures. The advancements in all of these categories have beentremendous. An article or even a book could be written on any one of theseareas. Within the space allowed, I am going to touch on the business oforthopaedics and try to engage you to think in a different way.

In 1980 it was much easier to run a practice; after all, it was prior to man-aged care, diagnosis related groups (DRGs), negotiated insurance contracts,90-120 day collections, large office staffs and talk of a major overhaul ofthe U.S. healthcare. These were the golden days of “Fee for Service.” Itoccurs to me that a majority of readers have never heard of “Fee forService.” Find a physician over 55 years old and ask himr to explain theconcept, and you will see tears come to his eyes. Simply, it meant that thephysician set his rates as he saw fit . A more formal term is “usual and cus-tomary” charges. Today, this is a term the insurance companies use toreduce their reimbursement to the member by setting their own “usual andcustomary” reimbursement. Interestingly, their “usual and customary” fee isalways lower than the physician’s charges. Do you ever wonder where theyfound a physician who actually charged an amount that low, or how abouta group large enough to establish a “usual and customary” amount?

The business of orthopaedics starting changing dramatically in the mid-to late ’80s and has not stopped. I guess in this case the saying is true: noth-ing is consistent but change. With the introduction of Medicare’s DRG, thereimbursement of fees started declining and insurance companies followedsuit. At the same time, insurance companies started making it more difficultto collect on bills requiring more documentation and follow-up. To complywith the insurance companies’ increasing demands, physicians increasedstaffing to handle the additional work. Overhead started to skyrocket (SeeExhibit 1.). This trend is not news to anyone today.

Exhibit 1. Rising Costs,Falling Gross Revenues andPlummeting “Profits”

Source:home.austin.rr.com/austin-txmd/Pages/intro.html

This pressure has created an environment for the practices to increaserevenue in a multitude of methods. At the same time, legislation (Stark I)was passed to make this even more difficult. While the professed intention

of this legislation was to prevent abuses by physicians, it seemed that theunderlying intentions were to punish the physicians in total. States startedto adopt their own legislation that had similar language and intentions.Today we have to deal with Stark II, which has been covered and discussedin many forums, and many attorneys have built their entire career in thisarea.

When I completed the sale of my distributorship back to the company, Ihad an orthopaedic surgeon friend ask me to help him find legal and effec-tive ways to bring more revenues into his practice. After researching hisrequest, I started a company, Strategic Orthopaedic Solutions, to help driveancillary income opportunities back to the physicians. I only bring this pointup to share with you several observations.

Most of the standard programs of ancillary income, such as ambulatorysurgery centers and imaging centers, had been around for several years.Moreover, it created an environment for the practice to look only for “homerun” programs or those that could bring in several hundred thousand dollarsa year. It certainly made good business sense to start with the home run;however, in many states these were not available due to CON (certificate ofneed). This required a new attitude on behalf of all surgeons; one of hittingsingles and doubles. Today it still requires that same new attitude, alongwith adopting the following:

• Evaluate a program and how it fits into the practice. Get staff andmanagement input; however, do not let them stop the program with-out good reasons that you agree with. Many times we see the physi-cian, the owner of the business, give in to their management and staffsimply because the management and staff do not want to take onmore work or a new project.

• Do not over analyze the opportunity to the point of “Paralysis byAnalysis.”

• Once the decision is made, embrace the program to make sure theimplementation is correct and complete. Don’t assume your staff willget it done without them seeing your commitment to the program.

• Take and maintain the leadership role. Remember, if others have beensuccessful with the program, so can you.

• Do not be afraid to Beta test the program in only part of the businessto test and validate the program prior to a full roll-out.

What are these singles and doubles? Today they consist of DME pro-grams, in-office orthotics, asset protection programs, DeferredCompensation Programs, automatic patient appointment reminder, negoti-ated supply contracts. The list goes on and on. One of the fastest growingprograms is in-office dispensing of medications.


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Physician: Embrace the New Attitude

Author: R. Andrew Guion



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With the growth of anything new, controversy has arisen to the efficacyof providing such a service to the patient. Below we will look at the duali-ty of the issue in regards to physicians providing point of care dispensingagainst the traditional written script. The American Medical Association hasbeen at the forefront of this debate, as seen in the following opinion. (Pleasenote, bold emphasis is mine.)

8.06 Prescribing and Dispensing Drugs and DevicesPhysicians should prescribe drugs, devices and other treatments based

solely upon medical considerations and patient need and reasonable expec-tations of the effectiveness of the drug, device or other treatment for the par-ticular patient. (2) Physicians may not accept any kind of payment or com-pensation from a drug company or device manufacturer for prescribing itsproducts. Furthermore, physicians should not be influenced in the prescrib-ing of drugs, devices or appliances by a direct or indirect financial interestin a firm or other supplier, regardless of whether the firm is a manufactur-er, distributor, wholesaler or repackager of the products involved. (3)Physicians may own or operate a pharmacy, but generally may not refertheir patients to the pharmacy. Exceptionally, a physician may refer patientsto his or her pharmacy in accord with guidelines established in Opinion8.032, “Conflicts of Interest: Health Facility Ownership by a Physician.”Physicians may dispense drugs within their office practices providedsuch dispensing primarily benefits the patient. (4) In all instances, physi-cians should respect the patient’s freedom of choice in selecting who willfill their prescriptions as they are in the choice of a physician and, therefore,have the right to have a prescription filled wherever they wish. (SeeOpinions 9.06, “Free Choice,” and 8.03, “Conflicts of Interest:Guidelines.”)1

What these recommendations fail to address is the noncompliant patientas it relates to not taking their medications and the subsequent affect it hason the ability of the physician to adequately treat the patient. The stagger-ing statistics of this effect are outlined in the information below provided bythe National Association of Chain Drug Stores.

Three out of every five doctor visits result in a prescription being issuedby the physician. However, as many as half of all patients fail to have theirprescriptions filled and as many as 30 percent fail to have their prescriptionsrefilled.

Moreover, studies show that by the time the patient gets from the doc-tor’s office to the pharmacy, many have forgotten half of the doctor’sinstructions about their prescribed medication.

Estimates of the costs of noncompliance range from $50 billion to $100billion a year.

In fact, it is estimated that the medical complications that result from themedication noncompliance are responsible for the following:

• 10 percent of all hospital admissions• 25 percent of all hospital admissions among the elderly• 23 percent of all nursing home admissions• Loss of 20 million work days annually2

While it would seem in the best interest of physician and patient to limitnoncompliance by providing these necessary medications in a more costeffective generic form at the point of service, the question of whether or notto provide this service can only be answered at one’s individual discretion.

Moreover, there are several forms or formats of this program in the mar-ket place, and which format works for you is based on your individual sit-uation. One thing to note: several of these companies are new to the marketand have inflated earning claims.


Enquiry No 35

Advantages of In-office Pharmacy

Quick and Reliable Dispensing of Medicine for All Your Patients Fact: Pharmacies report that many patients leave the physician’s office andnever fill their prescription. This statistic could be as high as 30 percent.

Your patients will be provided medication in the clinic. Patient compli-ance will increase, because this ensures that the patient starts the medicationimmediately, eliminating procrastination of their responsibility to acquiretheir own medication from their local pharmacy. The process is quick, reli-able and extremely simple.

Easy Program to ImplementAn in-office physician dispensing system takes less than thirty seconds

to dispense; resulting in little impact on your staff. The company pre-pack-ages all prescriptions before they are shipped to the clinic. The system pro-vides physicians, group practices, specialty clinics and dietary facilities withdouble safety sealed prescription medications appropriate for direct dis-pensing to their patients. The medication is ready to be dispensed as soon asthe clinic receives the shipment.

Earn More Money Without Seeing Additional PatientsWhen you participate in the in-office physician dispensing program, you

can channel therapeutic, financial and administrative challenges into oneprofitable care-centered office program. You can choose from 2,500 phar-macy products.

State RegulationEach state has its own regulations in relation to in-office dispensing.

Check with the provider of the program regarding to what your rules andregulations will be.

Basic Requirement of the PracticeAll that is required of your clinic is a locked cabinet or drawer. If you

plan to carry controlled medications, they must be stored behind a doublelock. Since the company seals all of its medications in a prescription-readyformat, it assumes all the liability for the medications in case of recalls. Youcarry the same liability that you would if you were to write a prescription.

One might ask why every physician doesn’t take advantage of programslike these. It seems like a no brainer. That is a very good question, but theanswer lies in the physician’s leadership and his ability to embrace the newattitude of taking charge of his future. My challenge to all physicians is totake charge in 2007; after all, it is your business.

What opportunities come next? Tomorrow these programs will comefrom the imagination of the physicians and entrepreneurs who have theirfinger on the pulse of the practice and can design new programs and navi-gate the regulatory world. Who knows, maybe you have that idea right now.

Act on it.

Andy Guion started in the orthopaedic industry in 1980 as a sales associ-ate and later became a distributor for a major orthopaedic products com-pany. He is the founder of Strategic Orthopaedic Solutions, now know asBottomLine Medical, Inc., a provider of ancillary income programs formedical practices. He can be reached at [email protected].

References1. American Medical Association. Issued June 2002. This opinion is a consolidation of previousOpinions 6.04, “Fee Splitting:Drug or Device Prescription Rebates;” 8.06, “Drugs and Devices:Prescribing;” and 8.07, “Gifts to Physicians:Offers of Indemnity.” www.ama-assn.org/ama/pub/category/8483.html.2. National Association of Chain Drug Stores, “Ask Your Pharmacist about Your Prescriptions…And Get the Answers.” www.nacds.org/wmspage.cfm?parm1=2626



Once an orthopaedic surgeon has invented a new product, the “easy”work is done—next, that invention must get to market. Some surgeon-inventors will leave or trim their practices and establish a business tocommercialize their inventions. As one surgeon-turned-entrepreneur putit, “As a surgeon I can help hundreds of people a year. But, as a business-man I can help tens of thousands.” For him and those like him, a busi-ness incubator can help with the transition from surgeon to entrepreneur.

A business incubator (sometimes called an accelerator) nurturesemerging growth businesses, helping entrepreneurial ventures growstronger and increase their likelihood of success. Of incubator graduates,87 percent survive , while only 44 percent of all new firms survive forfour years .

Over 5,000 incubators operate worldwide, with more than 1,100 inthe U.S. All incubators provide some combination of commercial spaceand supporting services, but only a few provide specialized facilities andservices for orthopaedic ventures. The Northeast Indiana InnovationCenter (NIIC) in Fort Wayne, Indiana (See Exhibit 1.) is an example ofthe latter for orthopaedic surgeons and inventors forming new compa-nies.

Exhibit 1. Main Entrance to the Indiana Innovation Center.

Profile of an Orthopaedic-Specific Incubator & CommercializationCenter

Located only 45 minutes from the orthopaedic industry cluster inWarsaw, the Innovation Center targeted orthopaedic ventures from dayone, with a set of biomedical-specific incubation features layered on topof a full complement of incubator facilities and services. (See Table 1.)

Table 1. Innovation Center Incubator Service Offerings.

Business Incubation:the Path fromSurgeon to Inventorto Entrepreneur

Authors: Wade Lange and Steve Franks

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Incubation/Accelerated Growth Services

Orthopaedic Specific Services

Fully furnished turn-key commercialoffice space in a new 40,400 squarefoot building.

Wet/dry labs housed in an environ-mentally controlled wing.

Business development services thatinclude strategic planning, leadershipdevelopment, product development con-sulting and management recruiting, plusaccess to a network of business serviceproviders.

A common equipment room contain-ing key biomedical common equip-ment, including a replication of a hos-pital’s re-sterilization environment.

An in-house seed capital fund and anetwork of angel and venture capitalinvestors.

Industry-specific support staff and ini-tiatives.

Full amenities including conciergeservice, shared business equipment,on-site workout studio and conferenc-ing facilities ranging from six to 80-person capacity.

Network of orthopaedic-industry-experienced service providers like IPattorneys and regulatory consultants.

Community of like-minded people – other entrepreneurs.

Community of peer orthopaedic entre-preneurs.

Stage Gate Product DevelopmentServices geared to decrease time andcost to market.

Dedicated business developmentresource to open doors, make contactsand reduce start-up risks.


Enquiry No 12



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A Solid Base of General Incubation ServicesBesides its physical facilities, the Innovation Center made a strategic

decision to invest heavily in business-supporting services for its clients.It employs more than three times the national incubator average of full-time professional staff (ten vs 2.8). As a result, it is able to provide themission-critical continuum of complex and value added services thatgrowing surgeon-inventor ventures need.

The Innovation Center is the only incubator we are aware of that isISO 9001:2000 certified. Its performance has exceeded the best-in-classbenchmarks set by the National Business Incubator Association. Itscoaching has helped clients achieve employment growth of 30 percentand revenue growth of 118 percent. iii

Laboratory facilities Not Commercially Available within 100+ MilesLab facilities fall generally into two types – dry and wet. A wet lab is

like your college chemistry lab and will enable a venture to performchemical or biological development projects. A dry lab, like your collegephysics lab, is right if your development efforts are focused on mechan-ical experiments and testing. Without a lab you restrict yourself to“office” activities and will have to go outside for lab services or contractmanufacturing resources.

A standard wet lab suite at the Innovation Center (See Exhibit 2.)includes a sink, a fume hood for toxic work, a positive pressure hood forsterile work, counter-height work space, a two-person open office cubi-cle and a gas closet. Clients supplement this equipment with any special-ized equipment needed for their particular venture. For example, a ven-ture designing a ligament fixation device may require a strength tester.

Exhibit 2. A standard Wet Lab Configuration at the Innovation Center

Common Biomedical Equipment Room Reduces the Fixed Start-upCost Burden

Beyond their wet lab furnishings, residents of the Innovation Centerwho have a demonstrated need also have access to a common room out-fitted with shared equipment that would be prohibitively expensive foreach venture to purchase on its own, such as:

• Beta Star Autoclave/Sterilizer• Deionizer and Reverse Osmosis Pure Water System• Virtis Freeze Dryer• So-Low Lab Freezer to -85° C

continued from page 34 • So-Low Lab Refrigerator• Miele Laboratory Glassware WasherThe Biomedical Common Equipment Room at the Center is shown in

Exhibit 3.

Exhibit 3. Biomedical Common Equipment Room.

Additionally, since many orthopaedic ventures design instruments,implants or cases that will need to survive numerous cycles of hospitalre-sterilization procedures, the Innovation Center replicates that steriliza-tion environment to provide a realistic life cycle testing facility – evenincluding the RFID inventory tracking equipment expected to becomemore and more prevalent for asset tracking. Solstice Medical, located inthe biomedical wing of the Innovation Center, administers the sterile hos-pital environment and partners with Innovation Center clients for its use.

Orthopaedic Industry-Specific Support Staff and InitiativesWade Lange is the Innovation Center’s Director of Development for

the orthopaedic and medical device clusters. His thorough understandingof the clinical trials new orthopaedic ventures may face comes from hisextensive background in contract research. His years leading the IndianaHealth Industry Forum introduced him to numerous orthopaedic andmedical device business leaders – an extensive network of industry con-tacts that Innovation Center clients are able to access.

Network of Orthopaedic Industry-Specific Service ProvidersThe orthopaedic industry has its own practices, and when your ven-

ture needs help, you need an expert. The Innovation Center has assem-bled contacts with intellectual property attorneys experienced withorthopaedic IP, contract attorneys familiar with orthopaedic businesspractices, FDA regulatory consultants, contract research or test facilities,contract manufacturers, contract designers and prototype builders, andeven venture capitalists with experience investing in new orthopaedicventures.

Community of Peer Orthopaedic EntrepreneursEvery incubator resident benefits from being around a community of

entrepreneurs. Imagine the difference between working in an incubatorenvironment in which you are surrounded by 30 other business ownersvs. working at home or in an office complex. The dynamics are polaropposites. At home or even in an office complex, you can be very isolat-




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ed. But at an incubator, everywhere you turn you see others with thatsame hunger you have, facing the same challenges you face and solvingthe same issues you are solving.

At an orthopaedic-specific incubator, you benefit from interactingwith a whole family of like-minded orthopaedic entrepreneurs – peoplewho understand your industry. At first glance, you might think that wouldmean “competitors,” but the Innovation Center experience is quite theopposite. Innovation Center orthopaedic clients tend to be complementa-ry and synergistic. Certainly they share advice, and some have evenworked together, partnered on customer projects and entered into jointdevelopment agreements.

At the time of this writing, the Innovation Center houses the follow-ing orthopaedic ventures.

• OrthoPediatrics• PearlDiver, An orthopaedic software venture• Schwartz Biomedical • Solstice Medical• Valpo Orthopedic Technology

A Track Record of Helping Physician-InventorsFor the past three years, Innovation Center companies have swept

Purdue University’s Opportunity for Indiana Business Plan Competition.More importantly, two of those companies have been headed by surgeon-inventors. This year’s winner, Valpo Orthopedic Technology, is headedby orthopaedic surgeon Dr. Ron Clark, inventor of an arthroscopic uni-condylar knee replacement, among many other orthopaedic inventions.Last year, emergency room physician Dr. Ed McEowen’s company, NewParadigm Concepts (NPC), took first place.

Dr. McEowen worked with the Innovation Center as an affiliate (non-resident) client for over a year while maintaining his practice. When heneeded wet lab space to test his product prototype – a groundbreakingblood parameter monitor – he switched to an Innovation Center wet labsuite. Dr. McEowen describes his incubation experience:


Enquiry No 36

“The term ‘business incubator’ was for us particularly apt.Initially, the growth that we experienced was in business educa-tion. As business novices, learning the ‘business ropes,’ especiallythe development of a business plan, was a crucial step in provid-ing a panoramic scenario of a process and a timeline to commer-cialization. The funding we received as recipients of first prizeallowed us to acquire equipment, supplies, and lab space needed tobegin expanded in vitro research. On the strictly practical side, theInnovation Center provides common use equipment (refrigerator,freezer, sterilization equipment, biohazard waste disposal, etc.)that is essential and that would have made a serious dent in limit-ed financial resources. Taken together, all these factors and morehave advanced NPC’s goals far beyond where we would otherwisebe.”

Is it Time to Commercialize Your Invention?If you want to explore the transition from surgeon to entrepreneur, we

urge you to engage professional assistance from a business incubator. Becareful to select one with a strong service program, proven track recordand with orthopaedic (or at least medical device industry) expertise ifpossible.

Wade Lange is the Director of the International Center of OrthopedicsResearch (ICOR), a joint collaboration of The Northeast IndianaInnovation Center, the Fort Wayne-Allen County Economic DevelopmentAlliance and the City of Fort Wayne. He can be reached [email protected].

Steve Franks is NIIC Gateways Program Manager at the NortheastIndiana Innovation Center, where he helps accelerate new ventures via astructured stage gate venture development program. He can be reachedat [email protected].

To see your products

listed within the

Product News and

Product Feature

sectionsemail your information to [email protected]


PPRROODDUUCCTT NNEEWWSS


New Shoulder Instruments fromArthroCare Sports Medicine

Elevator-RaspCombining the features of an elevator and a rasp into one

instrument, the Elevator-Rasp is an instrument used torelease tissue from the glenoid rim. The elevator frees tis-

sue adhesions, while the rasp prepares the glenoid edgeby creating a bleeding bed for tissue reattachment. Therasps are available in 15° (22-4001) and 30° (22-4002)versions to maximize access.

Cuff ElevatorThe Cuff Elevator (22-4003) is used in arthroscopic shoulder surgery.The instrument is used to release and mobilize the rotator cuff duringarthroscopic Rotator Cuff repair.

ArthroCare Sports Medicine Tel: 408-736-0224 www.arthrocare.comEnquiry No 37

Pilot® Pedicle Screw System

Life Spine received FDA 510(k)clearance for the Pilot® SpinalSystem, a versatile new rod andpost pedicle screw system allow-ing for quick one step lockup. ThePilot thoracolumbar pedicle screwsystem has been designed to deliv-er implants accurately and rapidlywhile maximizing versatility withthe following features:

• Cannulated, self-tapping andself-drilling pedicle screwswhich eliminate time consuming steps from the procedure.

• Top-loading rod delivery system that self-adjusts to suit difficultanatomy.

• Connector heads that can be preloaded outside of the body andoffer 360° screw head angulation, including adjustability in virtu-ally every plane.

• In situ compression and distraction that can be done directly withthe bone screw drill guides.

• In-line, single step lockup allowing for an open or MIS approach.

Life Spine Tel: 847-884-6117 www.lifespine.comEnquiry No 38

Kinetic® Internally Dynamized ACPS

Life Spine introduces Kinetic®, a revolutionary new internally dynamizedanterior cervical plating system. This unique plate features 2mm of fullyadjustable internal dynamization per level and an ultra slim pre-lordosedprofile. Kinetic is internally dynamized, virtually eliminating adjacentlevel abutment which is often seen with competitive products.

The innovative design of this system allows surgeons another optionwhen performing cervical spine surgery. The plate provides a large graftwindow while still allowing for generous screw angulation. The screwsare offered in two diametrical sizes and are both self-tapping and self-

drilling. Additionally, the Kineticbone screws utilize Life Spine’sSecure-Snap™ locking mecha-nism, which produces an audibleand tactile “click” when lockedand prevents screw rotation andbackout while still allowing forscrew angulation.

Life Spine Tel: 847-884-6117 www.lifespine.comEnquiry No 40

Darco Air Traveler WalkerTM

Darco International, Inc. announces another great addition to ourexpanding line of quality footwear products – the Darco Air TravelerWalker™. The Air Traveler is a lightweight, low profile walker, builtaround a padded circumferential air bladder that provides the ultimate incompression and comfort. The air bladder compression level can easilybe adjusted to meet the patient’s specific needs. The Air Traveler is light-weight and low profile, enabling the wearer to ambulate without altering

the gait pattern. The walker is secured to the legwith a five-way strapping system of heavy-duty Velcro straps that are easily adjusted bythe patient. The Air Traveler features a rock-er sole that assists the patient’s transitionfrom heel to toe when walking.Anatomically contoured spatula stirrupsconform to and immobilize the leg andankle comfortably. Additionally, the AirTraveler may be fitted with the Darco PegAssist™ off-loading insole if desired orneeded.

The Air Traveler comes in five sizes toaccommodate almost any size foot. The AirTraveler is priced lower than a vast majori-ty of other premium air walkers on the mar-

ket, and is backed by Darco’s uncondi-tional satisfaction warranty. The Darco

name has been synonymous withquality and value for over 21

years and this new productexemplifies these beliefs.

Darco International, Inc.Tel: 800-999-8866

www.darcointernational.comEnquiry No 39




Isobar LP Pedicle Screw System

Scient’x USA, Inc. has launchedits new Isobar LP Low ProfilePedicle Screw. This screw offers atop loading tulip head design withan inner locking set screw to offermore space in the construct. Thescrews feature a self tappingdesign and are available in a widevariety of diameters and lengths.

The screw design will accept astandard 5.5mm diameter rod and works in conjunction with the othercomponents of the Isobar TTL System, including the EASYS CrosslinkSystem and the Dynamic TTL-Rod which provides controlled motion incompression, distraction, flexion, extension and rotation.

The Isobar LP Pedicle Screw system offers surgeons the option to usea smaller lower profile screw which allows for more space in the overallconstruct when used in conjunction with the Dynamic TTL-Rod.

Scient’x USA, Inc.Tel: 407-571-2550www.scientxusa.comEnquiry No 43

Ancillary Advantage™

Ancillary Advantage™ is a program and service designed and run byOrthoRx to address an orthopaedic practice’s needs for optimally imple-menting and managing their DME program. The first program to addressall the needs and concerns of the practice from the practice’s point ofview, Ancillary Advantage answers the question of whether a practice isoptimally integrating and utilizing DME as an Ancillary to the practice.

Ancillary Advantage addresses optimizing DME in-house in a com-prehensive way, as opposed to traditional DME programs which justaddress a part of the challenge. Notable parts of Ancillary Advantageinclude reviewing and negotiating payer contracts, hiring and training anin-house DME Coordinator, managing and having real-time knowledgeof products and their clinical applications, payer relationships, laws, reg-ulatory updates, coding changes, billing systems, collection processes,and providing daily and monthly financial and administrative reports.The program provides each practice with a full due diligence and reviewof the practice’s current DME program with an estimate of projectedgrowth prior to any formalized relationship.

Ancillary Advantage can be tailored to benefit any sized practice andis available anywhere in the U.S.

OrthoRx Tel: 877-679-6796www.orthorx.netEnquiry No 41

Antelys GX

Scient’x USA, Inc. haslaunched its new AntelysGX Peek Spacer System.The Antelys GX Systemwas designed to meet thetechnical and surgicalrequirements of lumbararthrodesis for surgeonsusing an anterior approach.It is available in a wide vari-ety of heights and angles, and includes easy to use instrumentation.

Developed in conjunction with leading surgeons led by Dr. PasqualeMontesano of Sacramento, California, the implant offers a smaller foot-print to conform to the natural vertebral anatomy while still providingoptimum contact area between the graft and the vertebral endplates.

Antelys GX is an addition to other PEEK Spacer Systems offered byScient’x USA including the Ellys, Corelys, Aurys and Antelys PEEKSystems.

Scient’x USA, Inc.Tel: 407-571-2550www.scientxusa.comEnquiry No 42

The New Shoulder Tray FromArthroCare Sports Medicine

ArthroCare Sports Medicine has launched its new shoulder instrumentset. The Atlantech Collection range features instruments designed toaddress the demands of shoulder arthroscopy. The instruments have beenselected to perform most needs in arthroscopic surgery. Clockwise fromthe left: (a) a tray with soft tissue arthroscopic punches, graspers, rongeursand suture graspers; (b) the bottom of the main compartment holds ashoulder retractor should the need arise to convert from an arthroscopicprocedure to mini-open or open surgery; guidewires, switching stick andwissinger rod for portal placement and suture cutter; (c) Caps-LockCannula drivers for portal placement; (d) rasps, elevators, knot pushers,probe, crochet hook, chondral pick and mallet. All in one convenient setup.





New Shoulder Instrumentsfrom ArthroCare Sports

Medicine

Lobster Claw™(Left). As a ring grasper, the Lobster Claw SutureRetriever (22-4020) is intended for atraumatic sutureretrieval during arthroscopic procedures. Sutures arecaptured and slide freely in the loop of the closed jawsduring retrieval. Additionally, the sutures may begrasped securely in the small ridges or “teeth” on thefront of the jaws.

Crochet Hook (Below). The Crochet Hook (22-3020) is intended foratraumatic suture retrieval during arthroscopic proce-dures. Designed to allow a captured suture to slide freelyduring suture retrieval, the hook tip will prevent snag-ging on the leading edge of the cannula during instru-ment withdrawal.


Anti-Extravasation Instrument Cannula

Cannuflow’s innovative EntreVuTM

anti-extravasation instrument cannu-la makes interstitial swelling duringshoulder procedures a thing of thepast. The company’s patent-pendingExtravastat anti-extravasation tech-nology is incorporated into the can-nula to reduce interstitial swelling at its source, the portal/tissue interface.

• Delivers continuous interstitial fluid removal, visibly reducingswelling of soft tissues while maintaining good joint distension.

• Ensures that surgeon has more surgical time, allowing for moreconfident use of arthroscopic techniques.

• Preserves tissue quality throughout the procedure, which shortensthe recovery time and is important should the surgeon have tomove to an open procedure.

• Provides greater pressure control inside the joint throughout theprocedure.

• Threaded design ensures secure positioning so the cannula resistspulling out.

• Its transparency allows surgeon to more easily visually monitorinstruments and sutures.

• Ergonomic obturator provides improved grip and control. • Proximal seal design prevents fluid squirting.

CannuflowTel: 866-484-5400 or 408-764-0220www.cannuflow.com Enquiry No 47

Combination Outflow and Anti-Extravasation Scope Sheath

Cannuflow’s TwoVuTM EX combina-tion outflow and anti-extravasationscope sheath delivers a simple solu-tion to minimizing and controllinginterstitial shoulder swelling duringpercutaneous arthroscopic shoulderprocedures. The patent-pending, softpolymer, low-profile device slips

easily over an arthroscope’s own sheath and uses Cannuflow’sExtravastat anti-extravasation technology to provide a dedicated outflowchannel from the joint space as well as a completely separate anti-extravasation outflow channel.

• Minimizing interstitial fluid saturation ensures that tissue qualityis maintained.

• Continuous outflow maintains excellent visual clarity and fluidpressure throughout procedure.

• Eliminates having to switch from inflow to outflow on the scopeto remove debris and regain image clarity (even with a pump).

• Reduces potential for damaging fluid temperature build-up (above45°C) in the joint when using RF devices.

• Provides greater pressure control inside the joint throughout pro-cedure.

• Insulates the metal scope sheath, preventing interference with RFablation or thermal remodeling devices.

Cannuflow Tel: 866-484-5400 or 408-764-0220www.cannuflow.comEnquiry No 45

Advancing Two-Stage RevisionArthroplasty

The InterSpace™ Shoulder is a major advance-ment in treating patients suffering from thecomplication of infected total shoulder arthro-plasty. Like the InterSpace Hip and InterSpaceKnee, the InterSpace Shoulder provides forconsistent and uniform release of antibiotic intothe local infected area. It also offers patients theopportunity for improved function after thefirst-stage treatment and better rehabilitationafter the definitive second-stage operation.

The InterSpace Shoulder is the only pre-formed, partial load-bearing device consistingof Gentamicin-impregnated Cemex® PMMAbone cement. It also complements theEquinoxe™ shoulder system, allowing surgeons to meet a wide range ofchallenges in shoulder reconstruction.

InterSpace is manufactured by Tecres S.p.a., Verona, Italy and distrib-uted in the U.S. exclusively by Exactech.

Exactech, Inc.Tel: 800-EXACTECH (800-392-2832)www.exac.com Enquiry No 46



Aptic Superbones Introduces New TotalElbow Arthroplasty Training Model

Aptic Superbones, makers oforthopaedic training and work-shop models, introduces a newtissue-realistic total elbow arthro-plasty training model. The modelis suitable for training anddemonstration of complete elbowreplacement surgical techniques.

The elbow model includes aleft humerus with a vice blocklocated on the proximal humerus shaft, and a left radius and ulna togeth-er with a vice block located on the distal end. Assembled with realisticcast ligaments and a red soft cancellous core, the model is designed toprovide a realistic simulation for practicing advanced elbow replacementtechniques. In addition to its use in surgeon workshops, the elbow isdesigned be used by sales professionals and device manufacturers in theelbow repair market, and is easily held in traction with vices.

The elbow arthroplasty model complements Aptic’s line of upper limbworkshop bones, shoulder arthroscopy and arthroplasty models, and wristand hand models. In addition to the upper limb, Aptic also offers completelower extremities as well as spine, pelvis, skull and their exclusive line ofarthroscopy models, the SAM Shoulder and PAM Hip.

Aptic SuperbonesTel: 866-265-BONE (2663)www.apticsuperbones.com Enquiry No 52


Small Joint Instruments Set

All of the benefits that you have come to rely on in ArthroCare’s rangeof handheld devices are now brought together in this new set of instru-ments for ankle, elbow and wrist arthroscopy. The arthroscopic punchesand graspers from the Atlantech Collection feature the unique “IntegralPivot” pinless hinge system, affording the mechanism greater strength.The ergonomic finger loops allow for maximum control and comfort, nomatter which style of grip is preferred. ArthroCare continues to payspecial attention to the cutting edges which are polished usingfine diamond polishing compound, resulting in the finestcutting edge.


Global™ AP® Adjustable NeckShoulder Replacement System

DePuy Orthopaedics launched theGlobal™ AP® Adjustable NeckShoulder Replacement System at the2007 AAOS Annual Meeting. Thisnew system more closely recreates thenative anatomy of the natural shoul-der.

The Global AP Shoulder offerssurgeons the option to choose either afixed or adjustable neck, which meansthey may replicate a patient’s naturalanatomical requirements.

Advantages of the Global APShoulder include:

• Clinical experience: Based on17 years of proven technology with the Global Shoulder System.

• Adaptability: Variable and fixed neck options give surgeons theability to adapt the implant to the patient’s unique anatomicalrequirements.

• Proper biomechanics: Additional head sizes offer surgeons the abil-ity to recreate proper joint biomechanics.

DePuy Orthopaedics, Inc.Tel: 800-366-8143www.jointreplacement.comEnquiry No 51

AgilityTM LP Total Ankle Replacement

DePuy Orthopaedics launched the Agility™ LP Total AnkleReplacement for the treatment of end stage ankle disorders at the 2007AAOS Annual Meeting. The Agility LP Total Ankle is intended to pro-vide an alternative to ankle fusion surgery as well as an advancement incurrent ankle replacement technology.

The Agility LP Total Ankle, a fourth generation ankle design, is basedon 20 years of market availability and clinical experience that has result-ed in total ankle surgery being an option for a broader patient population.Advantages of the Agility LP Total Ankle include:

• Greater ankle support and potential longer-term stability than ear-lier implants: The Agility LP Total Ankle is designed to providewider coverage of the talus. Since the ankle is a weight-bearingjoint that absorbs the body’s full impact, this wider coverage of thetalus offers patients’ greater ankle support and the potential forlonger-term stability.

• Simplified bearing replacements: If the polyethylene insert needsto be replaced due to wear, the Agility LP Total Ankle is designedto allow the surgeon to do so more easily than previous generationdesigns.

DePuy Orthopaedics, Inc.Tel: 800-366-8143www.jointreplacement.comEnquiry No 50




The UNISYNTM Modular Total Hip System

The UNISYN™ Modular Total HipSystem features patented connectiontechnology that allows surgeons to inde-pendently fit diaphysis and metaphysis,then select the neck component that willbest restore length, offset and antever-sion of the patient’s hip joint.

AVAILABLE NOW: The UNISYNHIP SYSTEM offers HA-coated titani-um plasma proximal bodies that feature:

• Optimal High Crystallinity HA• Improved potential for high osteo-conductivity to the titanium

plasma • 21 UNISYN Proximal Bodies allowing for customizable fit

The UNISYN Hip System features stem options in straight and bowedvariations, in 10mm through 20mm diameters.

UNISYN Modular necks provide the surgeon with 59 head centers toassist in restoration of the patient’s hip anatomy. Version control of themodular necks by choosing optimal anteversion.

The UNISYN Hip System features complete interchangeability of allcomponents and combines intramedullary and extramedullary fit to pro-vide complete joint reconstruction and implant longevity.

Hayes Medical Inc.Tel: 916-355-7100www.hayesmed.comEnquiry No 53

CalcLock™ Calcaneal Trauma System O r t h o H e l i x ™Surgical Designs,Inc. introduces theC a l c L o c k ™Calcaneal TraumaSystem, a set ofimplantable bonefixation plates andscrews. The con-toured plate designallows for an anatomical fit to the calcaneaus. The plate includes twolocking screw options positioned to address the most unstable part of thecalcaneal fracture, as well as a 4.0 mm partially threaded screw to increasecompression towards the sustentaculum tali. Both 3.5 mm and 4.0 mmscrews are available and include blunt tips to reduce tendon and soft tis-sue irritation.

In the most critical areas of the plate, FEA testing results show that theCalcLock Plate produces 4 times less stress than the market leader, reduc-ing the chance of implant failure and 9 times less displacement, offeringa more stable construct. OrthoHelix is a medical device company devel-oping a comprehensive set of instruments and implants for use infoot/ankle and hand/wrist reconstruction surgery. “Surgeons Speak. WeDELIVER.”™

OrthoHelix Surgical Designs, Inc.Tel: 866-904-9583www.orthohelix.comEnquiry No 54

MaxTorque™ Cannulated ScrewSystem

OrthoHelix™ Surgical Designs, Inc. introduces the MaxTorque™Cannulated Screw System, a series of implantable bone fixation screws.The system’s intended use is to stabilize and aid in the fixation of frac-tures, fusions and osteotomies involving long and small bones. This self-tapping screw has been specifically designed to maximize thread depth toimprove overall compression and pull out strength. The system includes4.0 mm, 5.5 mm and 7.0 mm color coded titanium alloy screws in variouslengths with corresponding flat and contoured washers.

Recent testing showed that the MaxTorque 7.0 mm screw averages46% and 57% better pull-out strength than two well known market lead-ing cannulated screws. OrthoHelix is a medical device company develop-ing a comprehensive set of instru-ments and implants for use infoot/ankle and hand/wrist recon-struction surgery. “SurgeonsSpeak. We DELIVER.”™

OrthoHelix Surgical Designs, Inc.Tel: 866-904-9583www.orthohelix.comEnquiry No 56

Universal Surgical Power Tool System

Soplus announces its new SO+Universal system of power tools.SO+ Universal is based on a singlehandpiece which can be powered bybattery, AC adapter or compressedair, with a comprehensive range ofinterchangeable attachments. WithSO+ Universal, surgeons can per-form drilling, sawing, reaming orany other procedure using the samehandpiece – for all types of largebone, reconstructive, trauma andsports surgery. Interchangeabilitymeans fewer items need to be pur-chased, which cuts back on costs,battery charging routines and main-tenance.

The SO+ Universal system’s advanced technology features high-power, brushless, sensorless, electronically-controlled electric motors forextra power and reliability; 18-volt, high-capacity lithium-ion recharge-able, autoclavable or drop-in batteries; and a powerful, silent, low-main-tenance pneumatic in-line ceramic motors for compressed-air tools.

The SO+ Universal system provides flexibility and power in a com-pact, lightweight form so that the surgeon can operate with high preci-sion, particularly in minimally invasive surgery, hip resurfacing, etc.

SO+ is the new brand of Sodem Systems, based in Geneva,Switzerland, a leader in orthopaedic power instruments for 25 years.

SoplusTel:. 41-794-96-96 www.soplus.chEnquiry No 55




AEGIS™ Anterior Lumbar Plate System

DePuy Spine, Inc. has launched thefirst anterior plate system designedto treat degenerative conditions ofthe lumbar spine. AEGIS has thelowest profile of any anterior lumbarplate system and is the only one thatcan be implanted mid-line or laterally between any two vertebrae in thelumbar region, including the sacrum (L1-S1).

AEGIS is contoured to recess into the space between two vertebralbodies and features angled tabs (15 degrees) that attach the plate to thecortical rim (anterior edge) of the vertebrae. The plate also uses a patent-ed screw locking mechanism that employs cams instead of screw coversor other means to hold the screws in place. The Tri-lobe CAM-LOC™feature adds no additional profile to the construct and provides positivefeedback that the screws are locked.

AEGIS also has a unique, semi-rigid design that allows for load shar-ing between the construct and the bone graft, reducing the risk of screwbreakage and encouraging fusion.

DePuy Spine, Inc.Tel: 800-366-8143www.depuyspine.comEnquiry No 57

Ultamet® XL and the AltrXTM

DePuy Orthopaedics, Inc., announced two new options for restoring hipmobility in patients who require total hip replacement at the 2007 AAOSAnnual Meeting: the Ultamet® XL and the AltrX™, Altra-Linked polyeth-ylene are the newest bearing options available for use with the PinnacleAcetabular Cup system. These systems provide advanced technology forrecreating the natural ball and socket joint of the hip to help increase jointstability, range of motion and longevity.

The Pinnacle® Ultamet XL is a modular metal-on-metal bearing optionfor use in the Pinnacle Acetabular Cup System. Key benefits include:

• Greater range of motion and stability: Ultamet XL bearings offerup to 159 degrees range of motion and 20mm of jump distance(compared to 28 and 36 mm Ultamet bearings).

• Proven technology: The latest data shows the Pinnacle AcetabularCup System has demonstrated 99.9% survivorship at five years.

• Significant wear reduction: In a recent wear simulator study,44mm Ultamet XL bearings reduced early wear (termed run-inwear) by 92% compared to traditional metal-on-metal bearings.

The Pinnacle® AltrX is a polyethylene bearing liner for use in the PinnacleAcetabular Cup System. Key benefits include:

• Significant wear reduction: In laboratorysimulations, AltrX polyethylene linersachieved a 92% wear reduction over con-ventional polyethylene liners, while main-taining excellent mechanical integrity andoxidative resistance.

• Based on proven technology: AltrX linersare built on the success of DePuy’sMarathon™ liners, which have over sixyears of demonstrated clinical success.

DePuy Orthopaedics, Inc.Tel: 800-366-8143www.hipreplacement.comEnquiry No 58

Hand Innovations’ Products

DePuy Orthopaedics, Inc. launched three new Hand Innovations’ prod-ucts designed for a less invasive approach to fracture surgery for thehand, wrist, foot and shoulder at the 2007 AAOS Annual Meeting.

The F3TM Fragment Plating System can be used with fractures in thehand, wrist, and foot:

• Accommodates for normal movement - The F3 System isdesigned to be shaped and molded directly onto the patient’sbone, rather than forcing the bone to conform to the plate.

• May shorten recovery process - The F3 System’s special instru-ments and implant components allow for a more precise place-ment of implants, allowing for minimal soft tissue disruption.

The S3TM Shoulder Nail Plating System is changing the approach totreating proximal humeral fractures:

• Minimally invasive approach - By utilizing a smaller incision, theS3 allows for less soft tissue disruption, which may shorten therecovery process.

• Provides a strong and stable repair - The combination of strongsmooth pegs for support and suture attachments to capture softtissues help support the repair and potentially provide for betteranatomically correct outcomes.

Multi Directional Threaded Pegs for the DVRTM Anatomic PlatingSystem were developed to address the fact that no two wrist fractures arealike. Surgeons may opt to use fixed or multi directional pegs with theDVR, which:

• Allows surgeons the opportunity to address different fracture pat-terns

• Allows for greater variation in patient anatomy• Provides a strong and stable repair

DePuy Orthopaedics, Inc.Tel: 800-366-8143.www.jointreplacement.comEnquiry No 59



U.S Orthopaedic Product News (OPN): How did you first get intothe surgical power tools business?

Bernard Legrand (BL): After completing my studies in business andinternational economics, I started out as an entrepreneur in Switzerlandin the 1980s. I set up a small company that acted as the distributor in theSwiss market for U.S. companies in the orthopaedic surgery field. LaterI ceased to be a distributor, and we turned to designing and manufac-turing our own products under the name Sodem Systems. I was luckythat the traditional Swiss watch industry was going through hard timesback then, so there were some extremely talented precision mechanicalengineers around looking for jobs. Most of those who joined us then arestill with us today! The company has grown to become one of the world’smost technologically advanced producers of surgical power tools, and wesell to more than 70 countries.

OPN: And you only sell power tools, is that right?

BL: Yes. Unlike many companies in this sector, we specialize in powertools. Well before we arrived on the U.S. market under our own name,we were developing innovative power tool technologies for severalleading manufacturers of power instruments for orthopaedics and spinesurgery. So many surgeons already “know” our technologies and preferusing them, even though they may not realize that these technologiescome from SO+. From now on, we will make our innovations availableas products for worldwide distribution under the SO+ name.

OPN: Is being Swiss an advantage?

BL: In a field like ours, where precision is so important, you bet it is. Wedesign and manufacture our products in Switzerland, where precisionand high quality are close to a national religion.

OPN: You mentioned your new company name, SO+, which youofficially announced at AAOS. What is the reasoning behind this newname?

BL: SO+ has a lot to do with sharing our corporate vision, our obsessionwith technology, our insistence on excellence and the kind of newproducts we are going to develop and market. Our reading of the marketis clear: surgeons, and others involved in the surgical process, such asnurses and hospital administrators, want their vendors to be more respon-sive, to have a better understanding of their needs and to develop high-performance, user-friendly products that help them do their jobs better.And they want their vendors to be partners. They want them to beaccessible, so that if any problems arise they can be resolved swiftly andeffectively. Our new brand, SO+, promises all those things. SO+ alsopromises more of the technological expertise and innovation ourcustomers have come to expect of us, based on more than 20 years ofexperience.

OPN: What is distinctive or original about your products?

BL: Almost everything! At San Diego, we launched not only our newSO+ brand, but also a new high-end line of surgical power tools called“SO+ Universal” for large bone, reconstructive, trauma and sportssurgery. (See Figure 1.) Our research showed us that there was anopportunity at the high end of the market for a system that could offer asingle handpiece and a full range of interchangeable attachments –drilling, reaming, sawing and so on. So we designed a tool that is morepowerful and accurate in the surgeon’s hand, yet lighter in weight andeasier to manipulate. In fact, the SO+ Universal system provides theperfect fit with the surgeon’s needs – it’s an extension of his own handthat feels natural and helps him to do his job better, and it’s also a


EEXXEECCUUTTIIVVEE PPRROOFFIILLEE

Bernard Legrand

Chief Executive Officer, SO+

Bernard Legrand is Chief Executive Officer and one of the foundersof SO+ (Soplus), a company specializing in surgical power tools basedin Geneva, Switzerland. Mr. Legrand travels throughout the world tomeet with customers and orthopaedic surgeons, and is a frequentvisitor to the U.S. We took advantage of his recent trip to the AAOSmeeting in San Diego to ask him about his company’s products andstrategy for the U.S. market.





complete set of precision instruments that virtually becomes part of him.At the same time, SO+ offers the perfect fit with hospital administrators’needs too. To help them do their job better, we offer products withimproved TCO (total cost of ownership) and superior operational charac-teristics compared with their competitors. For example, because the SO+Universal is a single-handpiece system, there are fewer items ofequipment to purchase and manage.

Figure 1. SO+ Universal runs onLithium-ion batteries that staycharged for twice as long as old-style batteries, and last up to fourtimes as long.

OPN: How do you position yourselves in the market?

BL: Right now, there are two or three companies driving this market, andabout the same number selling “me too” products on the basis of lowerpricing. We’ve positioned SO+ Universal as the innovation leader,targeting the most sophisticated surgeons who are looking for the highestlevels of performance, and who have the budget to afford the mostadvanced tools.

OPN: How will you distribute your products in the U.S.?

BL: We used some of our time at AAOS to make contacts with potentialpartners. We’re seeking a partnership with a company large enough tooffer constant, easy access to our products and customer serviceanywhere in the country. We are hoping to partner with a company thatis dynamic and forward-looking, that prides itself on understandingsurgeons’ needs, one that wants to offer a complete range of products andservices to its customers.

OPN: Can you tell me who you’re talking to?

BL: SO+ will make an announcement when we’ve cut a deal with theright partner. Let me come back to the concept of the complete range. Iam always very surprised how many orthopaedic manufacturers sendtheir surgeons to their direct competitors for power instruments – toimplant their own hip or knee prostheses! However, Zimmer’s recent

move into power tools demonstrates the need for implant companies topartner with power tool manufacturers, to complete their product andservice offerings and to protect their business.

OPN: So who is it going to be?

BL: Whoever it is, you can be sure we will work in the U.S. with acompany that sees itself as a real partner to hospitals and surgeonseverywhere. A company who is as passionate as we are about impeccablecustomer service, and has a real gift for knowing what customers want.Of course, we’ll do everything necessary to help them achieve that,without any restriction. Our partner will benefit fully from our policy ofcontinuing innovation, and offering the SO+ Universal line will helpthem develop their own implant sales..

OPN: Hospitals expect implant companies to offer power instruments,but implant manufacturers are often reluctant to service capitalequipment. What can SO+ do to help resolve this paradox?

BL: This was one of our primary concerns when designing the SO+Universal. Therefore, we designed it in sub-modules that can easily bechanged, exactly as is practiced in other, non-surgical industries. Whenneeded, service will be available at the local level within the hour. SO+instruments are maintenance-free and designed to be very simple, so inthe unlikely event of a breakdown, they’re easy to repair withoutadvanced knowledge or equipment. The repair man simply changes oneof the modules. It’s kind of an obvious idea, to make products so simplethat repair people don’t need doctorates. I sometimes wonder whynobody else thought of it before.

OPN: What developments do you have in the pipeline for forthcomingU.S. product launches?

BL: SO+ is all about harnessing new technologies that haven’t been usedbefore in surgical power tools, and applying them to the surgeon’sadvantage. I believe this is a radical new approach in this business. Wehave a series of launches planned for the next few years. SO+ Universalis set to roll out nationwide this summer, and there will be an opportu-nity for surgeons who are interested in this state-of-the-art technology tobeta-test it even earlier. But you can be sure that the innovations SO+ isbringing to the U.S. market today are the first of many. Innovations likeour Li-ion batteries or our high-performance brushless and sensorlessmotors will be followed by a host of others in the coming years.

OPN: You keep coming back to technological superiority in yourproducts. Is that the core value of your company?

BL: It’s one of our major values, but not the only one. We don’t pushtechnology for technology’s sake. Technology isn’t worth a cent if it isn’tboth user-beneficial and user-friendly. Every technology we embrace hasto bring benefits to the user – and I mean the user in the widest sense. Wemust offer benefits for both the surgeon and the administrator. Why didwe switch to brushless, sensorless motors, for instance? Not only to givegreater power and control, although those are very important, but also to





make the product more reliable and to make repairs easier. With thisinnovation, if you need to change the motor, you have only three wiresto connect, instead of eight with the old-style motors. We want SO+products to be so easy to use, you don’t have to look at the instructionbook. We will never stuff our products full of features that nobody willever use. Instead, we make them ergonomically and intuitively correct, ifI can coin a phrase. We put technology at the service of the user, so theuser doesn’t have to worry about a thing except doing his own job.

OPN: If technology is not your only major value, what are theothers?

BL: Anticipation and innovation. We serve a branch of medicine inwhich results and professionalism are extremely important. Surgeons andadministrators expect us to understand their needs and to keep pace withdevelopments. What we do is to try to anticipate those needs, so that weare always ready with the technological innovations that will fulfill them.When a new technology hits the market, very often you will find that itcarries the SO+ brand. We are the first to offer 250-watt motors, forexample. That’s about one-third more power than you get with similartools from our competitors. Our electric motors are more powerful, yetmore compact than those of other manufacturers, because of the experi-ence and know-how we bring in the whole area of miniaturization. AndSO+ is the first to embrace Lithium-ion battery technology. Everybodyuses Li-ion batteries in their cellphones and other appliances, but onlySO+ has made Li-ion available as a power source for surgical tools.

Our core value is this: finding the perfect fit with the needs of ourcustomers. I happen to believe that technology and innovation are themost important ways to achieve that. We always have to be ready toquestion what we do, and find ways of doing things better. Keepingourselves abreast of technological developments in the field oforthopaedic surgery, and in the wider world, is an exciting challenge, andwe’ve made it part of our daily lives. But one thing isn’t going to change:our commitment to excellence on the U.S. market, and our determinationthat with SO+ you’ll always be sure of the perfect fit.

OPN: By “the perfect fit,” you mean the interface between thesurgeon’s hand and the handpiece?

BL: That’s one very important aspect of it, but it’s more than that. Takethe fit between the saw blade and the saw, for example. A perfect fit is amajor factor of efficiency and safety. In this respect, it is sad to see howpoorly most manufacturers of so-called “compatible” saw blade copiesrespect the proper tolerances. We strongly recommend the use of originalblades only. Using non-original saw blades with poor tolerances reducescutting efficiency by up to 30 percent, and may cause handpiece failureduring surgery. This is as true for SO+ as it is for all power instrumentmanufacturers. Badly-fitting blades simply cannot give the accurateresults that surgeons want, and could harm patients. Given that fact, it isamazing to see that some hospitals, even in the U.S., often try to save alittle money on saw blades, something they would never do, say, forbrake pads in their cars. I predict that jeopardizing the precision of thecut, i.e. the final clinical outcome, just to save a few dollars, will becomea more and more difficult decision to justify.

Here’s another example. When the surgeon uses a cutting block toguide the saw blade, the high oscillating speeds of the saw blade causesfriction between the side of the blade and the cutting block. That’s notoptimal. At SO+ we have some innovative ideas about how to managethe interface between the blade and the cutting block, which we willshare with our U.S. partner. Here again, what is important is achievingthe perfect fit.

OPN: Are you confident about your future in the U.S. surgical powertools industry?

BL: I sure am! In the U.S. we have surgeons who want the highest levelsof results. We offer the most innovative and technologically advancedproducts, and we’re going to team up with a partner who will bring thebenefits of SO+ products and service within reach of every surgeon in thecountry. SO+ is here to stay!

Bernard Legrand may be reached at [email protected].


Enquiry No 60

If you have developed a new or improved surgical technique andwould like to share it with your colleagues, please send the details tous and we will feature it in future issues.

Send emails to: [email protected]

AAtttteennttiioonn OOrrtthhooppaaeeddiicc SSuurrggeeoonnss


Enquiry No 13


Enquiry No 14



We last wrote about upper extremities and power equipment in theNovember/December 2005 issue. (“Stryker Rules the Power Market;Smaller, Niche Players Position Themselves to Address UpperExtremities,” U.S. Orthopaedic Product News, November/December2005.) Since that time, many existing companies have brought out somepretty cool technologies in these areas (e.g. Stryker’s PrecisionOscillating Tip Saw and, of course, the spate of distal radius plates). Atthe same time, a handful of newcomers have gained FDA clearance foreverything from traditional pins, wires and bone graft pellets to knotlesssuture anchors à la KFx Medical. We took note of high-speed power toolguru Anspach receiving clearance for a knotless suture anchor, as well.

Not every 510(k) will lead to a marketable product. Often, receipt ofclearance simply sets the stage “just in case” the company decides tomove forward and enter the U.S. with a product. Some products will livepredominantly in a file, while others will undergo a number of designiterations prior to market introduction.

Regardless of intention, since October 2005, 17 companies havereceived their first 510(k) through FDA’s Orthopedic AdvisoryCommittee for products that are either power-driven or could be used inupper extremity applications. This article provides a bit of informationon them and their 510(k) clearances. (We included some sternal devices,too, if for no other reason than they don’t get much attention in manyother forums.)

Acute Innovations, LLCHillsboro, Oregon USAwww.acuteinnovations.com

• Acute Bone Screw • K061206• Titanium screw in varying lengths• Available partially or fully threaded, cannulated or solid, with

or without plate and/or washer• Intended for use in stabilization/fixation of fractures and for

fusions and osteotomies• Also developing U-shaped rib plate• Acumed spin-off

Axiom Orthopaedics, IncJersey City, New Jersey USAwww.axiomortho.com

• Shoulder Resurfacing System• K061862• Proposed design to incorporate cobalt chrome humeral heads

for articulation with resurfaced or non-resurfaced glenoidfossa; interior surface coated with a plasma spray titanium sub-strate and a calcium phosphate coating

• Indicated for use as a hemi shoulder replacement in patientswhere the humeral head and neck are of sufficient bone stockand the rotator cuff is intact or reconstructable

• Patents pending• Developing Fourth Generation shoulder platform

Bioretec Ltd.Tampere, Finlandwww.bioretec.com

• ActivaPin and ActivaScrew • K061164 (ActivaPin) and K062980 (ActivaScrew)• Resorbable poly(L-lactide-co-glycolide) devices• Indicated for fixation of bone fractures and for osteotomies,

arthrodeses, etc.• Founded 1998, with focus on drug delivery products

BK Meditech Co., Ltd.Kyunggi-Do, Republic of Korea

• Pin Screw • K061599• Stainless steel • For use in conjunction with rigid external supporting frame for

immobilization of open and/or unstable fractures and where thesoft tissue injury may preclude the use of other fracture treatments

• Also markets external fixators, spine systems and prosthetics out-side the U.S.


FFIISSCCAALL FFIITTNNEESSSS

Finland to Korea, Screws to ShaverBlades: New Companies GainAccess to U.S. Market for theirUpper Extremity or Power Tools

Author: Shirley A. Engelhardt






Collagen Matrix, Inc.Franklin Lakes, New Jersey USAwww.collagenmatrix.com

• Collagen Bone Healing Protective Sheet • K052041• Conformable, resorbable membrane matrix engineered from

highly purified type I collagen derived from bovine Achillestendon

• Can be used either alone or in conjunction with internal fixationdevices such as plates and screws

• Intended for use with traditional rigid fixation for maintainingthe relative position of weak bony tissue; for use alone formaintaining the relative position of bone grafts or bone graftsubstitutes in certain reconstructive procedures; and for cementrestriction in total joint arthroplasty procedures. Not intendedfor use in the spine or for load bearing indications unless usedin conjunction with traditional rigid fixation.

• OssiMend Bone Graft Material • K052812• Resorbable collagen mineral composite matrix (strips, pads,

granules) comprised of bovine type I collagen (45 percent) +anorganic bovine bone mineral (55 percent)

• Combined with autogenous bone marrow and intended for usein filling bony voids or gaps of the skeletal system (i.e., extrem-ities, spine, and pelvis) that are not intrinsic to the stability ofthe bony structure

• Numerous dental and neurology clearances as well • Distribution agreements with Stryker for nerve cuff and dural sub-

stitute membrane products• Founded 1997 to develop collagen-based technology for tissue

repair and regeneration

Delta Surgical Instruments, IncHighland Mills, New York USA

• Pins and Wires • K060654• Various implant grade stainless steel (316L) pins and wires • Indicated for use in fixation of bone fractures and bone recon-

struction or as a guide/aid for insertion of other medical devices

David J. Slutsky M.D.South Bay Hand Surgery CenterTorrance, California USA 90503

• Fragment Specific Fixator • K052498• Lightweight, radiolucent construct attaches to self drilling bone

pins• Intended for use in a nonjoint bridging configuration (allowing

for immediate wrist motion during the fracture healing periodof six to eight weeks) or in a joint bridging manner to provideligamentotaxis to obtain and maintain the fracture reductionduring the healing period.

Eberle Feinwerktechnische Systeme GMBH & Co. KGWurmberg, Germanywww.efs-eberle.de

• Eberle Shaver System C2 and Shaver Blades

• K061134• Power instrument system with control unit, footswitch, hand-

piece and accessories• Designed for use in arthroscopic procedures

• Also markets arthroscopes, handheld instruments, interferencescrews and shaver blades for a variety of other companies’ systemsoutside the U.S.

Gexfix USA Inc.Boca Raton, Florida USAwww.gexfix.ch

• Geneva External Fixator (Gexfix)• K052605• Small and large fixators for distal radius, wrist, leg, ankle and

pelvic applications and a hybrid system for proximal humerusand tibial fracture applications

• Indicated for use in fracture fixation, osteotomy, arthrodesis,correction of deformity, bone reconstruction and revision pro-cedures where other devices have been unsuccessful.

• Founded 2004 by “professionals from the orthopaedic traumaindustry”

Gold Standard Orthopaedics LLCLouisville, Kentucky USA

• GSO Bone Fixation Fasteners• K063589• Stainless steel smooth or threaded pins and wires and cortical,

cancellous and malleolar bone screws• Indicated for use in fixation of bone fractures, for bone recon-

structions, as guide pins for insertion of other implants orimplantation through the skin so that traction may be applied tothe skeletal system; not indicated for spinal fixation

Intai Technology Inc.Ontario, California USA(Intai Technology Corporation, Taiwan)www.intai.com.tw

• Intai Bone Plate and Bone Screw System• K063020• Mini, small and large configurations of stainless steel land tita-

nium plates and screws• Intended for use in fixation of fractures in clavicle, pelvis,

scapula, calcaneus, long bones (humerus, ulna, radius, femur,tibia, and fibula) and small bones (metacarpals, metatarsals andphalanges).

• Also received FDA clearance for DHS and DCS plate and screwsystems for treatment of femoral fractures

Internal Fixation SystemsMiami, Florida USA

• IFS Cannulated Bone Screw • K061620• 316L stainless steel self-tapping, self-drilling, partial or fully

threaded screws in a variety of diameters and lengths• Intended for use in treatment of bone fractures, such as





fractures of the tarsals and metatarsals, and for metatarsals andphalangeal osteotomies and arthrodesis of hand and foot

KFX MedicalCarlsbad, California USAwww.kfxmedical.com

• KFx Knotless Fixation System • K061294• aka SutureCross Knotless Anatomic Fixation System • Features KFx Nail Bone Anchor + KFx Suture Lock Bone

Screw Anchor + optional KFx Targeting Grasper• Intended for use in fixation of soft tissue to bone during rotator

cuff repair• To be offered at select U.S. Centers of Excellence

Koby SurgicalHouston, Texas USAwww.metasurg.com

• Koby Surgical Internal Fixation System • K060026• Ti6Al4V cannulated or non-cannulated bone screws in varying

diameters and lengths• Intended for use to aid in the fixation of fractures and for non-

unions, arthrodeses and osteotomies of the small bones in thehand and foot

• Appears to be focused on foot surgery

Medicon E.G.Tuttlingen, Germany www.medicon.de

• Stern-a-Fix Sternal Closure System• K053624 • Titanium plates and self-drilling, locking, standard and emer-

gency bone screws• Intended for use in stabilization and fixation of anterior chest

wall fractures including sternal fixation subsequent to sternoto-my and sternal reconstructive procedures

• Also markets various orthopaedic, craniomaxillofacial and spinalpower and handheld instruments

• Numerous dental and neurology product clearances as well,including high speed drill, implants and clips

Newclip TechnicsHaye-Fouassiere, Francewww.newcliptechnics.com

• Distal Radius Locking Plating System• K061917• Various Ti6Al4V plates with locking screws, locking pegs,

locking threaded pegs and cortical screws• Intended for use in fixation of intra- and extra-articular frac-

tures as well as distal radius osteotomy• Also markets specialty plates and screws outside the U.S.

Praesidia S.R.L.Bologna, Italywww.praesidia.it

• Flexigrip Sternal Closure System• K063009• Specially-shaped nitinol shape memory alloy clip that goes

around (but does not completely encircle) the sternum• Intended for use in closure or repair of the sternum after ster-

notomy, fracture or dehiscence• Also markets (outside the U.S.) medical disposables (e.g. fluid

capture, sterile covers, lavage kits, etc.)

Promed Advance Technology Co., Ltd. Taipai, Taiwan

• Osteo-Link Bone Void Filler Pellets • K060809• Resorbable calcium sulfate pellets • Indicated for use in bony voids or gaps that are not intrinsic to

the stability of the bony structure (e.g. extremities, spine andpelvis)

Rema Medizintechnik GMBHTuttlingen, Germanywww.rema-surgery.com

• Arthroscopic Shaver Blades• K060172• For use with a variety of companies’ shaver systems• Intended for shaving, cutting and abrading of bone and tissue

during arthroscopic procedures • Also markets a variety of instruments for minimally-invasive

surgical procedures

This array of companies serves to reinforce what has always struckme about orthopaedics. The companies that find their way into the mar-ket are anything but samey or predictable. They hail from all over theplanet and bring forth manufacturing expertise, design ingenuity, a pas-sion for orthopaedics, an entrepreneurial bent, a dream of a better prod-uct or some marvelous combination thereof. I keep my eye on the 510(k)roster for a lot of reasons, not the least of which is its ability to clue meinto what could be the next homerun company or product.

Shirley A. Engelhardt is President and Founder of KnowledgeEnterprises Inc., a strategic services firm solely focused in orthopaedics.She is also a Founder and Managing Member of Knowledge Ventures,LLC, an early stage musculoskeletal investment fund. She can be reachedat 440-247-9051 or [email protected].

Enquiry No 61



March 2007

March 12-15 Cowen & Company27th Annual Health Care ConferenceVenue: Marriott Copley Place, Boston, MAwww.cowen.com/UpcomingConferences.asp

March 29 BioCentury and Thomson present FutureLeaders in the Biotech Industry. The 28th

Clear Route Investment ConferenceVenue: Millennium Broadway Hotel &Conference Center, New York City, NYwww.biocentury.com/html/conferences/fl/2007/index.htm

April 2007

April 19-20The Beard Group Annual Conference onHealthcare Transactions SuccessfulStrategies for Mergers, Acquisitions,

Divestitures and RestructuringsVenue: Chicago, ILwww.beardconferences.com

April 26-27 “Investment In Innovation (In3) Europe:Bridging European & US Medical DeviceInnovators, Investors & Companies”™Venue: The Sheraton, Rome, Italywww.medtechinsight.com/conferences.html

May 2007

May 14-15Rodman & Renshaw 4th Annual GlobalHealthcare ConferenceVenue: Monte Carlo, Monacowww.rodmanandrenshaw.com

June 2007

June 3-5Investment In Innovation (In3) Medical

Device SUMMIT: A Preview of Early-Stage Medical Technology CompaniesVenue: Grand Hyatt, San Francisco, CAwww.medtechinsight.com/conferences.html

June 20-21OMTEC: Orthopaedic Manufacturing& Technology Exposition andConference, 3rd Annual MeetingVenue: Rosemont, ILwww.orthosupplier.com

October 2007

October 3-5“Investment In Innovation (In3) East: A Preview of Early-Stage MedicalTechnology Companies”™Venue: The Westin Copley Place Hotel,Boston, MAwww.medtechinsight.com/conferences.html

EENNTTRREEPPRREENNEEUURRIIAALL EEVVEENNTTSS CCAALLEENNDDAARR

Enquiry No 15



As 2007 dawns, the health care compliance train continues to pick upsteam. High profile cases, continuing civil investigations and changeswithin industry are all at the forefront of this new year. Accordingly, Iwish you all a happy and healthy 2007 and am pleased to provide youwith a small snippet of what lies ahead in the world of health care com-pliance.

Patrick Chan, M.D. Remains Under House Arrest Awaiting TrialWhile accepting envelopes full of cash from your sales representa-

tive likely has not crossed the mind of any of my readers, neurologistDr. Patrick Chan of Searcy, Arkansas may feel differently about theissue. Indicted in September 2006 for accepting illegal remuneration inthe form of split commissions with his sales representatives (deliveredin cash on a regular basis to Dr. Chan’s office), Dr. Chan remains underhouse arrest awaiting a spring trial. If convicted of the four counts ofsoliciting and receiving illegal remuneration (kickbacks), Dr. Chanfaces substantial fines and jail time. This case represents perhaps one ofthe most blatant alleged violations of the Anti-Kickback Statute. It is,however, important to keep in mind that, under the Statute, given theright circumstances there is no real distinction between taking envelopesfull of cash from your sales representative and taking money in the formof “compensation” from a medical device manufacturer or health careentity for services that you are not really performing or that are not legit-imately necessary to the entity that is paying you. The lesson here: don’tlet the egregious nature of the crimes allegedly committed by Dr. Chanor others lull you into a false sense of security. The government does notlook kindly (or forgivingly) upon any violation of the federal fraud andabuse laws, not just the “over the top” violations such as those allegedin this case.

Physician-Owned GPOs and Distributorships Under GovernmentScrutiny

One of my earliest articles for OPN discussed the emergence of thephysician-owned new technology company. Such companies werebeginning to spring up everywhere and were attracting a great deal ofattention, both from the physician population and governmental agen-cies alike. The Attorney General of the State of California issued anopinion discussing California’s take on such ventures and made it clearthat the 40 percent to 60 percent rule enunciated in the Stark Law wouldmost certainly apply to such investment situations. Beyond that notmuch official guidance has been offered on the topic.

Of late, we have seen physicians take one step closer to beinginvolved in the actual sale of medical devices and related products to thehealth care community by virtue of their investment in Group

Purchasing Organizations (GPOs) and privately ownedDistributorships. While we have not received clear guidance from thegovernment with respect to the appropriateness or legal requirements ofsuch arrangements, the government has advised the public, in a guid-ance letter issued in response to a written request from AdvaMed datedSeptember 6, 2006, that it is aware of the growing number of sucharrangements and it is looking closely at them.1 The government wenton to say that the Special Fraud Alert of 1989 regarding Physician JointVentures was applicable to all such GPO or Distributorship arrange-ments and furthermore, if “a substantial portion of a venture’s gross rev-enues is derived from participant-driven referrals [it] is [a] potentialindicator of a problematic joint venture.” Id. at page 2. Suffice it to saythat physician-owned anything, but certainly GPOs andDistributorships, will invite the highest form of scrutiny from the gov-ernment if it believes that physicians or the individuals and companiesthat do business with them are attempting to skirt the fraud and abuselaws that govern their relationships. Stay tuned on this issue.

Stepped-up Compliance Efforts by Industry as it Awaits InvestigationResults

It has been nearly two years since five of the biggest orthopaedicdevice manufacturers were served with subpoenas seeking documentsrelating to consulting surgeon relationships. It seems likely, based notonly on the government’s historical behavior with such investigations,but also on information that has trickled out into the industry during thecourse of the investigations, that 2007 may be the year that we are pro-vided with answers as to what the investigations found and what, if any,sanctions will be meted out.

What we do not have to guess about is how the industry is respond-ing to this investigation and the directives that the five companies underinvestigation may have already received from the government. Fromnew travel reimbursement policies to stricter billing and reportingrequirements for physicians providing services to industry, the changeshave been numerous and, in some instances, less than subtle. It seemsclear that the government will not tolerate haphazard recording of timeand services, nor will consulting physicians who travel across countryor abroad on behalf of industry be able to bill hour for hour for the timethey spend sitting on airplanes or being otherwise ferried from locationto location. The consistent argument advanced by consulting physiciansis that they lose money being out of their offices for any extended peri-ods of time. While that is certainly true, that consideration may not fac-tor in when determining the fair market value of a physician’s time,


A New Year Brings More Compliance News

Author: Teresa Ford

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TTHHEE TTOOPP LLIINNEE

Enquiry No 15

whether providing services or merely traveling from point A to point B.These are only two examples of the many changes that industry hasbegun to implement, quite likely at least in part at the government’sdirection.

It is hoped that once the government completes its investigation,industry will have clear guidance as to how and when it may compen-sate its consulting physicians. For now, suffice it to say that we are allseeing the landscape change just a little at a time. Not only should younot expect these changes to go away, expect more of the same once theclouds lift and the government is ready to issue clear mandates regard-ing physician-industry relationships.

The Law Offices of Teresa Ford, PC (www.tfordlaw.com), located inHouston, Texas, specialize in healthcare and medical device issues.Areas of expertise include healthcare compliance program structuringand training, as well as advising individual physician clients. Foundingpartner Teresa Ford spent many years in the medical-legal arena, mostrecently as senior counsel for Sulzer Medica USA Inc. She can bereached at 832-251-9595 or [email protected].

1. See Guidance Letter from the Office of the Inspector General to AdvaMed dated October

6, 2006.


Enquiry No 62

Law Offices of Teresa Ford, PC

Proud to serve the physician community in matters of

health care compliance and business structuring2500 Tanglewilde, Suite 318, Houston, Texas 77063

tel: 832.251.9595 • fax: 832.251.9599

email: [email protected]

www.tfordlaw.com

Not Certified by the Texas Board of Legal Specialization

Enquiry No 16



Old age is no place for sissies.Bette Davis

The question isn’t at what age I want to retire, it’s at what income.George Foreman

Will you still need me, will you still feed me, when I’m 64?Paul McCartney

We have all seen the increased coverage in the media regarding unfundedpensions, low savings rates and Social Security’s insolvency. As afinancial advisor, I hope these messages might scare people into creatingmore realistic retirement plans. After all, a certain amount of “sky-is-falling” hype has spurred people into action before. But ironically, thesedoom-and-gloom messages are often more effective with well-behavedindividuals (or what you might call compliant patients) than they are withthe intended audience.

It may surprise you to know that according to national statistics, 30percent of retirement-age Americans have less than $10,000 in savings.The reasons for low savings can range anywhere from just failing to saveto other constraints such as limited education, low income or long-termillness. However, the unfortunate truth is that regardless the reason, thesepeople will work longer, spend less and rely heavily on Social Securityand Medicare.

The remaining 70 percent of Americans are “retirement savers.” Theyrespond to information and tax incentives by attempting to build privateretirement savings and pension benefits. Of this group, about two thirdsare on track to replace a reasonable percentage of their work income withretirement income. The remaining third of this group needs a little morework to get on track; either by saving more, spending less or delayingretirement for a few years.

Retirement saving and the lack thereof has become such a criticalissue in our country that the government enacted “catch-up” provisionsas a method for helping those who have pushed off the responsibility tosave. These “catch-up” provisions enacted by Congress provide certainadvantages such as higher contribution limits and greater tax savings forindividuals age 50 and over who contribute to IRAs and 401(k)s.

The best strategy is to start saving in your 20s or early 30s.Contributing to a 401(k) plan/IRA or building a long-term career at anemployer that offers a pension plan will make a big difference later.

Deposits to these accounts at an early age have a long time to grow andcompound without taxes. For example, a 30-year old saving $100 permonth until age 60 will accumulate almost four times as much money asthat of a 45-year old who starts saving $100 per month until age 60. Ifyou fall into this age-range, it is important to begin evaluating yourretirement savings options immediately.

Now, I believe that Baby Boomers, those Americans aged 42 to 60,deserve special mention. After all, they grew up in a time of nationalwealth. In an Allstate survey, 81 percent of Boomers said they were goodsavers, yet 27 percent don’t like to wait to buy things, even if they can’tafford them. Boomers deemed saving for retirement and quittingsmoking as the most difficult things to do.

Interestingly enough, a group of Boomers surveyed in a MetLifestudy consistently underestimated how long they were likely to live andoverestimated how much money they could draw from their nest eggs.Research shows that a majority of Baby Boomers don’t start saving untiltheir 50s. However, the median 401(k) account balance for a personnearing retirement is only $60,000. That won’t be nearly enough tosustain a long retirement. In reality, Baby Boomers need to save morecash now and also evaluate their health, disability and long-term careinsurance needs. If you find yourself in this situation, I recommend avisit to your financial advisor.

How much do you need in savings in order to retire comfortably?Each person’s situation is different. That’s why your first step should

be a meeting with your financial advisor. However, for a basic estimationof what you will need during retirement, multiply your annual householdincome by 10. If you earn $100,000, you’ll need to have $1 millionsaved; earn $250,000 and you’ll need $2.5 million, and so on. In doingthis calculation, I’m assuming that you’ll need 75 percent of your pre-retirement income to live, that you’ll receive some Social Security andpension benefits and that you will be drawing only five percent per yearfrom savings (without dipping into principal).

What should you do if you think you might fall short?First, take inventory of your retirement accounts. How many do you

have? Many of you likely have multiple plans, either pensions or 401(k)s.It is important that you evaluate how much is in them, how much are youadding and whether that is the maximum allowed. Ask your financial

How Much Money do you Need to Retire?

Author: Jeffrey B. Mackevich


HHEERREE’’SS TTOO YYOOUURR WWEEAALLTTHH



advisor to calculate how much you will have at retirement age based onyour current contributions and a conservative rate of growth.

Second, the easiest thing for you to do is to maximize the contribu-tions to your existing plans. You’ll save more money and there areimmediate income tax savings.

Finally, start some new retirement accounts. You don’t have to startwith a lot of money. The opportunity to save is almost unlimited. Myaverage client has at least four accounts working towards retirement. Inmy own household I count eight (yes, financial advisors do “eat theirown cooking”). These accounts can be in Municipal Bonds (for futuretax exempt income), Variable Annuities (I call them “unlimited IRAs”)and College Savings Plans (because many of us will have college agechildren when we want to retire).

Ultimately, knowing the appropriate amount of retirement savings towork towards depends on a number of factors. What is important is tounderstand the value of saving now for retirement and utilizing the manyinvestment vehicles designed to maximize your retirement savingpotential.

If you would like me to send you a simple one-page “financialprofile” worksheet, please send me an e-mail with your mailing address.I will also answer any specific questions from readers on this topic. Ifthere are other financial topics you would like me to cover, please e-mailme at [email protected].

Any opinions, statements or advice contained herein are purely theauthor's and in no way reflect those of Mesirow Financial Holdings, Inc.,or any of its affiliates and subsidiaries. Mesirow Financial does notprovide legal or tax advice.

Jeff Mackevich is a Managing Director in the Investment Brokeragegroup at Mesirow Financial. With more than 25 years of wealth manage-ment experience, Jeff specializes in analyzing and strengthening theinvestment programs, income portfolios and tax strategies of affluentindividuals. He can be reached at [email protected] or312-595-6384. Services offered by Mesirow Financial, Inc. MemberNYSE, SIPC.


Enquiry No 63

HHEERREE’’SS TTOO YYOOUURR WWEEAALLTTHH

Are you interested in sharing yourwisdom withfellowsurgeons infuture articles of OPN?

Editorial content andtopics of interest are always welcomed.

Contact OPN at: [email protected]



CCLLAASSSSIIFFIIEEDD

Enquiry No 64

KNOWLEDGE ENTERPRISESThe OrthoPeople

PRODUCTION COORDINATOROrthopaedic Publications

Working hours: 8am – 5pm M-Th. & 8am – 4pm Fri.

Description of Job Duties:The Production Coordinator is responsible for managing the artwork and editorial submissions from the contrib-utors’ hands through prepress layout and proofing to the final press process and delivery to the reader. TheProduction Coordinator ensures that the whole process is completed on time and without errors. Tracking submis-sions entails working closely with contributing clients, the design/layout team and the printer.

Specific responsibilities include but are not limited to:• Collect submissions and verify their proper placement in layout.• Upload final submissions to design team server.• Distribute proofs to editor and return edited files to design team for final layout.• Proof copy to ensure that editor’s edits are included and all submissions are included and properly placed.• Check the layout design consistency and make sure that overall design is clean and without errors.• Ensure that publications are printed and shipped to recipients on time.• Manage mailing lists and provide updated list prior to the launch of each issue.• Receive and record all reader reply cards and forward leads to advertisers and in-house sales associates.• Retrieve final print files from design team for online archive.• Daily maintenance of production schedule to keep process running smoothly.• Assist with technical issues and ways to improve magazine production process on an on going basis.

Qualifications:• Ability to juggle multiple tasks with a high level of accuracy while meeting deadlines in a fast paced environ-ment. Must be extremely organized. • Ability to work unsupervised as well as in a team setting.• Ability to troubleshoot, problem solve and think proactively.• Strong written and oral communication skills. Has a professional, positive demeanor with advertisers, vendors

and staff.• A minimum of 1-3 years production experience working for a magazine or in a related publishing production

position. • A working understanding of MS Excel, Word, Outlook and Adobe Acrobat. • Basic design and proofreading skills are preferred.

Send inquiries to [email protected]. No phone calls, please.


Enquiry No 17


Enquiry No 18


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