Rob Carson has a tough job.
Since April 2015, he’s been in charge of Medtronic plc’s spine’s marketing and strategy and, along with business president Doug King and other company leaders, has to figure out how to guide the 800 lb. gorilla of spine through a whole new healthcare economic environment and back to taking market share.
Medtronic and DePuy Synthes have been losing market share bit by bit to smaller competitors over the past few years. But in the emerging post fee-for-service era of Big Data, health system consolidation and need for scale, Medtronic is playing a whole new game.
Over the last couple of months, Carson has been sharing with OTW the company’s plan to win in this new era. He has the tools. Armed with the biggest intellectual property toolbox in the industry (including Michelson patents) and a scale of access to customers worldwide, the spine market leader is ready to engage this new environment.
The job of the company, says Carson, is to “improve spinal care—through procedure advancements, economic innovations, and global patient access—using all the expertise and resources available to the company. To do these three things, we have to do the basics very well—but also try things outside of the traditional.”
Four Key Strategies
Central to that vision is alignment. Economic alignment with stakeholder interests and technical alignment with a focus on sagittal alignment of the spine for better surgical outcomes. The company calls this effort the Sagittal Alignment Global Initiative (SAGI).
Carson outlined four key strategies which build on Medtronic spine’s strengths:
First, invest in core technologies and cadence. The company needs regular cycles of product releases. Since most are 510(k) in nature, speed matters. As an example he cited the launch of the overhauled anterior cervical fixation interbody device in a $900 million market.
Second, procedure innovation. The company is always searching for new and different ways to access, fixate and stabilize the spine. For example, Carson cited the MIDLF procedure, which rejuvenated the minimally invasive spine surgery (MIS) portfolio. He is very excited about the OLIF procedures program as a new way of access to the mid- and lower lumbar/lumbosacral discs. With OLIF 25 (for the L1/2 to L4/5 levels), the company encourages “thinking outside the muscle”—and staying away from nerves running through the psoas. Meanwhile, with OLIF51the company plans to accelerate and expand the market (the applicability of lateral surgery).
Further out, Carson said Medtronic is the lone company to invest in fusionless pediatric scoliosis.
In biologics, he cited Infuse’s product superiority and expectations of future BMP2 fusion innovations. He said the company has been having a “good” dialog with the FDA. “We’ve built the market’s leading portfolio of solutions, one including not only BioGrafts, but also (increasingly) BioSurgicals and BioLogistics offerings. The BioGraft platform is unique, in that its offerings span the range of patients’ osteogenic capacity needs.”
Third, surgical synergy through Medtronic’s Restorative Therapies Group (RTG). By collaborating across RTG businesses, Medtronic can augment procedures with information, power and energy. Through this collaboration, Carson says the company can “enable greater accuracy (with far less surgeon and OR staff radiation exposure), automation and spinal alignment.” He notes that the company has recently introduced E4, its latest nerve integrity monitoring system.
Finally, stakeholder alignment. Carson sees a world of value-based decisions for populations with at-risk payment models. “It’s a world one can’t fully predict, but to which we plan to contribute innovations.”
He sees opportunities for products and processes for surgery tools to help surgeons and hospitals streamline their costs. He notes, while the company is aware of the changing role of the sales rep in the OR, as instituted by Smith & Nephew, Medtronic’s stakeholder alignment strategies, “will not involve changes in the role of the sales rep.”
Scale Matters
The spine business is important to Medtronic. The division provides a big chunk of the parent company’s U.S. free cash flow, and, says Carson, “Spinal helps provide a scale, at the enterprise level as we seek to become a better partner in the healthcare landscape around the world.”
To large healthcare systems and government in the U.S., scale matters. “We want to bring quality across the board with great breadth and spinal is obviously a big piece of that in both the neuro and orthopedics world.”
We asked Carson how, specifically, how the company will be able to increase its “Cadence” of new product introductions.
Carson noted the Solera Voyager, OLIF procedures, ZEVO and Divergence on the cervical side, Elevate as well and anatomic PTC (pure titanium coating). [All of these are now in, at minimum, the limited market release phase.]
Benefits of Incremental Innovation
“We recognize incremental innovation is still really important. It’s the foundation in spine and broader orthopedics. I think sometimes we use incremental innovation as a damning term. There is a place for incremental improvement or said another way, optimizing the implants and delivery system that are out there and PTC devices, of which there are currently three, are examples of that.
They span the cervical to lumbar spine—but are really just the start of this first strategy. This year we’ll bring additional anterior and posterior interbody technologies to market—and going forward new options in trauma and complex spine. There will be a planned stream.
Solera Voyager is an example that really ties in to both the core tech improvements and cadence and also surgical synergy.
We’ve moved beyond the place where compatibility (with navigation and power) is really an option (i.e., we’ve reached a point at which we expect to enter the market with fully integrated systems—NAV, NIM and/or power-enabled out of the gates).
So, out of the box we’re creating both navigation and power use systems compatibility. So it’s an incremental innovation of its own that helps to optimize a minimally invasive TLIF, but it also furthers our surgical synergy strategy.
Navigation has progressed to a point where there is a lot of clinical value, due to its accuracy, but also economic value, due to reduced likelihood of revisions and associated costs.”
One of the main hurdles to surgical synergy adoption and even to minimally invasive procedures historically, says Carson, is a perceived and sometimes real learning curve such that if you’re not invested personally in climbing that learning curve, you’re going to suffer greater inefficiency and time in the OR.
“We’re really worked on optimizing the work flows for navigated procedures such that they are very efficient with OR time, which is costly.
So I think that that’s the improvements in workflow in the economic environment we’re in where one is increasingly incentivized not to bring a patient back to the O.R. or not to rehospitalize.”
Sales Reorganization
He told us that the company has taken a big step in integrating the sales leadership across spine, neuro and surgical technologies. It has reorganized commercial teams at the regional management level by creating a single group of regional vice presidents (RVPs) who divide the country.
“Those RVPs are no longer business specific, they span all of the Restorative Therapy Group businesses.” And they bring scale. Carson says part of the mix will be spine, neuro (including pain therapies), (dbs) and also surgical tech (including navigation) neurovascular, which was part of the Covidien acquisition, and Kanghui (Medtronic’s ortho and spine platform in China) are additional key businesses in RTG.
RVPs will have responsibility across business lines. Their view is not about maximizing the returns for any one business, as done historically, but instead maximizing the size of the “whole pie.”
In Praise of the Bundle
The goal is to help the company’s healthcare customers treat spine patients only once and keep them from returning to the operating room. New payment systems, like bundled payments, come with heavy financial risks for providers who miscalculate the costs of care for their patients. CMS (Centers for Medicare and Medicaid Services) has mandated that a significant portion hip and knee replacement procedures be reimbursed under bundled payments. While spine has not yet been included, company Chairman and CEO, Omar Ishrak has praised that payment approach and believes Medtronic would do well under that system.
And that’s where the four strategies come in.
The ability to access all of the company’s restorative therapies helps drive the surgical synergy strategy. It also recognizes the element of stakeholder alignment.
“We’re recognizing the evolving need and structures of health systems, so the more our ‘go to market’ approach and our interface with hospital clinical and administrative leadership reflects ‘one voice, ‘ it’s is better for everyone, ” said Carson.
This is particularly noteworthy in large integrated health systems where surgeons are no longer the only voice in making purchasing decisions. “Without question, surgeons play a leading role in a multi-stakeholder decision-making process—but it is a partnership.”
Carson says it’s a mixed landscape with some health systems and hospitals, including ACOs (accountable care organizations), where the extent of alignments among stakeholders now includes payers along with the administration and surgeons.
“The trends are clearly for increased alignment and partnerships. This [strategy for value-based healthcare] is one more thing we can do to be a better partner.”
Wrapping Strategies Together
Carson says wrapping each of the four strategies into a cohesive whole aligns the surgeon’s, the hospital’s and the payer’s incentives.
“Think of an integrated health system as the best example.
In that setting what one is going to want, regardless of where you sit in the stakeholder spectrum, is to intervene once and only once. You want an enduring outcome. And sagittal alignment is absolutely part of that enduring outcome, there’s data that shows that.”
If you create the right amount of lumbar lordosis in your L 4-5 spondy patient then the chances that that patient is not going to have a revision in five years are lower.
While the plan is young, the behemoth is starting to stir. Medtronic’s spine sales of $763 million for the quarter ending August 31, 2015, kept up with the general growth of global spine sales.
Rob Carson and Medtronic have the tools and scale to change the way spine care is created and delivered to patients in this new healthcare environment.
But as he said, “it’s unpredictable.”
