s&n says - Medical Device Daily

MEDICAL DEVICE DAILY 

JP Morgan Healthcare Conference 

Panel investigates more firms 

pursuing ‘private phenomena’ 

By HOLLAND JOHNSON 

Medical Device Daily Associate Managing Editor 

SAN FRANCISCO — What does a company do that for 

some reason has fallen out of favor with the public markets 

One, it can elect to tough it out and maintain its public 

status or, two, it can find a private buyer and attempt to 

reinvent itself outside the public eye. 

A panel at last week’s JP Morgan Healthcare Conference, 

titled “The Going Private Phenomena in Healthcare,” 

investigated what some have seen as a growing shift 

towards companies taking the road more private. 

Panel moderator John Coyle, a managing director at JP 

Morgan, said that especially in 2006 “we’ve seen a significant 

level of private equity activity across just about every 

industry with the most noticeable trait being the [large] 

size of the transactions.” 

THE DAILY MEDICAL TECHNOLOGY NEWSPAPER 

TUESDAY, JANUARY 16, 2007 VOL. 11, NO. 10 PAGE 1 OF 9 

Despite rising healthcare costs, 

consumer share relatively flat 

By MARK McCARTY 

Medical Device Daily Washington Editor 

WASHINGTON — The Centers for Medicare & Medicaid 

Services has tracked a wealth of data regarding 

healthcare expenditures, and while those numbers indicate 

rising costs, the increase has lost a little steam of late. Still, 

as employers and government feel the continuing pinch, 

they pass along some of the “ouch” to employees in the 

form of higher premiums and co-pays, which is often seen 

as making healthcare increasingly unaffordable. 

Unaffordable or not, the numbers suggest that household 

income has not felt the bite of added healthcare costs 

that is so readily assumed. 

Aaron Catlin, an economist with the National Health 

Statistics Groups at CMS, in an agency briefing last week, 

said that while healthcare spending in the U.S. rose 6.9% to 

a total of $2 trillion in 2005, that year’s total was nonethe- 

See Private, Page 5 See Costs, Page 6 

RoundTable aquires Advantis, 

forming Avalign Technologies 

A Medical Device Daily Staff Report 

RoundTable Healthcare Partners (Lake Forest, Illinois) 

reported that it has completed the acquisition of 

Advantis Medical (Greenwood, Indiana), a manufacturer 

of medical case/tray systems for surgical instruments, 

implants and devices. 

Advantis will be combined with Instrumed International 

(Roswell, Georgia), in which RoundTable acquired a 

majority interest in 2005, which specializes in manufacturing 

and sourcing of surgical instruments. The companies 

will form a new medical device outsourcing platform 

named Avalign Technologies. 

Financial terms of the transaction and RoundTable’s 

See RoundTable, Page 8 

Holiday notice 

The offices of Medical Device Daily were closed yesterday 

in observance of the Martin Luther King Day holiday 

in the U.S. 

International report 

Sequenom, Qiagen collaborate 

on fetal diagnostics program 


Sequenom (San Diego) reported a collaboration with 

Qiagen, a wholly-owned subsidiary of Qiagen NV (Venlo, 

the Netherlands), to jointly develop a “gold standard” preanalytical 

solution for small-molecule (fetal) DNA enrichment 

for prenatal diagnostics. 

Sequenom will retain exclusive distribution rights to 

the technology for enriching short nucleic acids developed 

under the collaboration. 

The companies said the collaboration will combine 

Qiagen’s expertise in preanalytical sample preparation 

technologies in life sciences and molecular diagnostics 

with Sequenom’s capabilities in genetic analysis technology. 

The goal of the collaboration is to develop what 

Sequenom termed “a robust and reliable set of reagents 

that optimize the enrichment of small nucleic acid fragments, 

such as circulating free fetal nucleic acids in 

See International, Page 7 

INSIDE: 

S&N SAYS DENIAL OF STAY TENDS TO SUPPORT PATENT BREACH ..................2 

MONOGRAM TO SELL $30M OF NOTES FOR NEW ASSAY ROLL-OUTS .....................3 

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TUESDAY, JANUARY 16, 2007 MEDICAL DEVICE DAILY PAGE 2 OF 9 

Court report 

S&N says judge’s denial of stay 

tends to support patent breach 


Smith & Nephew (Memphis, Tennessee) reported that 

a three-judge panel of the U.S. Court of Appeals for the Federal 

Circuit has denied a stay of injunction while appeals 

are heard in a patent infringement suit. 

S&N said that the permanent injunction was ordered 

on Sept. 28, 2006, and bars Synthes (Synthes USA, Westchester, 

Pennsylvania) and Synthes-Stratec (Oberdorf, 

Switzerland) from offering, selling or promoting Synthes 

Trochanteric Fixation Nail (TFN) and Proximal Fixation Nail 

(PFN) products in the U.S. for use in repairing 

intertrochanteric fractures. 

“Once again the court has clearly affirmed the severity 

of this patent breach,” said Mark Augusti, president of S&N 

Orthopaedic Trauma & Clinical Therapies. “Upholding the 

injunction, especially during any appeals process, strongly 

supports the defense of our intellectual property.” 

S&N filed the original suit against Synthes in November 

2002. A non-jury trial that began in December 2004 

concluded in March of 2005, with Judge Samuel Mays, Jr. 

issuing his findings supporting the injunction order on 

September 28, 2006. 

Smith & Nephew’s Trigen Nail system is used in the 

healing of proximal femoral fractures (upper leg bone fractures). 

Intramedullary nails are placed inside the bone to 

aid in the healing of bone fractures. 

In other legalities: 

• Brinks Hofer Gilson & Lione (Chicago) reported 

that its client, MarcTec (Effingham, Illinois) has reached a 

settlement with ArthroCare (Austin, Texas), in a lawsuit 

involving 10 patents related to suture anchors used in rotator 

cuff surgery and other arthroscopic procedures. 

Ralph Gabric, an attorney representing MarcTec, said 

ArthroCare will pay MarcTEc $2.75 million, plus future royalties, 

See Court Report, Page 8 

HealthSouth now set to pursue 

claims vs. Scrushy, auditors 


HealthSouth (Birmingham, Alabama) last week said 

that it is now in position to pursue its claims against its former 

CEO, Richard Scrushy, its auditors and others, during the 

period that its books were inflated by millions of dollars. 

HealthSouth said it received final court approval of 

agreements with the lead plaintiffs in the federal securities 

class actions and the derivative actions, as well as 

certain of its insurance carriers, to settle litigation filed 

against it, certain of its former directors and officers and 

certain other parties in the U.S. District Court for the 

Northern District of Alabama and the Circuit Court in Jefferson 

County, Alabama. The claims relate to financial 

reporting and related activity that occurred at the company 

during periods ended in March 2003. 

The settlement brought in the class action against 

HealthSouth and certain of its former directors and officers 

via payment of HealthSouth stock and warrants valued 

at $215 million and cash payments of $230 million. 

In addition, the federal securities class will receive 25% 

of any net recoveries from future judgments obtained by 

or on behalf of HealthSouth with respect to certain claims 

against Scrushy, Ernst & Young, the company’s former auditors, 

and UBS, the company’s former primary investment 

bank. The agreements were previously reported Sept. 27, 

2006 (Medical Device Daily, 2006). 

Jay Grinney, president/CEO of HealthSouth, said, “We 

now can focus our legal resources on asserting our claims 

against the company’s former chief executive officer; former 

auditors, Ernst & Young; and former primary investment 

bank, UBS, for the role each of them played in the fraud perpetrated 

against HealthSouth and its shareholders.” 

HealthSouth is a large provider of outpatient surgery, 

diagnostic imaging and rehabilitative healthcare services. 

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Upcoming med-tech meetings . . . 

• Hawaiian Eye Meeting, Jan. 14-19, Grand Hyatt Kauai 

Resort & Spa. 

www.vindicomeded.com 

• The Society of Thoracic Surgeons (STS) 43rd 

Annual Meeting, Jan. 29-31; exhibits: Jan. 28-30, San 

Diego Convention Center. 

www.sts.org. 

• Stroke Nursing Symposium, Feb. 6, Moscone West 

Convention Center, (San Francisco). 

www.strokeconference.americanheart.org 

• Merrill Lynch Global Pharmaceutical, Biotechnology 

and Medical Device Conference, Feb. 6-8, The 

Grand Hyatt (New York). 

www.events.ml.com 

• International Stroke Conference 2007, Feb. 7-9; 

exhibits, Feb. 7-8 (San Francisco). 

www.strokeconference.americanheart.org 

• American Academy of Orthopaedic Surgeons 

Annual Meeting, Feb. 14-18 (San Diego). 

www.aaos.org 

• Interdisciplinary Breast Center Conference, 17th 

Annual Conference, Feb. 24-28 (Las Vegas, Nevada). 

• Healthcare Information and Management Systems 

(HIMSS) Annual Conference & Exhibition, Feb. 25- 

March 1 (New Orleans). 

www.himss07.org 

• AACC: Clinical Applications of Pharmacogenomics 

(PGx), Feb. 26 – 27, Hyatt Regency Crystal City 

(Arlington, Virginia). 

www.aacc.org 

Medical Device Daily will periodically run “Upcoming 

med-tech meetings . . .” To make additions to this listing, 

contact Karen Young: phone, 404-262-5423; e-mail, 

karen.young@ahcmedia.com. 

Monogram to sell $30M of notes, 

add cash, for new assay roll-outs 


Monogram Biosciences (South San Francisco, California) 

said it will sell $30 million of 0% convertible senior 

unsecured notes, due 2026, to a qualified institutional 

buyer. Gross proceeds will be $22.5 million. Closing of the 

transaction is expected to occur later today. 

The principal amount of the notes will be convertible 

into shares of Monogram’s common stock at $2.52 a share. 

Proceeds of the convertible financing, together with 

more than $30 million in cash and investments held as of 

the end of 2006, are expected be used to support commercialization 

of HIV and oncology assays and for general corporate 

purposes. 

Monogram must file a registration statement registering 

the notes and the shares of common stock underlying 

the notes within 60 days of closing. Monogram then will 

have the option to cause all or any portion of the notes to 

convert into common stock at such time as the closing 

price of Monogram’s common stock is greater than $3.15 

for 20 out of 30 consecutive trading days and the satisfaction 

of certain other conditions. 

Subject to certain conditions, the notes may be 

redeemed by Monogram at any time following Dec. 31, 

2009, at their accreted value. The holders of the notes may 

cause Monogram to repurchase the notes on each of Dec. 

31, 2011, Dec. 31, 2016, and Dec. 31, 2021, at the principal 

amount thereof. The notes will be unsecured and subordinated 

to Monogram’s outstanding senior debt, including 

the $25 million 3% senior secured convertible note, due 

May 19, 2010, issued to Pfizer in May 2006 and the company’s 

line of credit with Merrill Lynch. 

Monogram has developed HIV tests designed to help 

make the complexities of antiretroviral therapy easier to 

manage. Its phenotype and genotype resistance tests, phenotype+genotype 

combination test, and viral fitness test 

help healthcare providers choose the drugs that will provide 

the greatest benefit and to help get the most out of 

antiretroviral therapy. 

In other financing news: 

• NNN Healthcare/Office REIT (Santa Ana, California), 

said it has accepted subscriptions for 200,846 shares of common 

stock, or $2,004,030, thereby exceeding the minimum 

offering of 200,000 shares required to be sold in its offering 

of up to 200 million shares. Having reached the minimum 

amount, the offering proceeds were released by the escrow 

agent and are available to the company for acquisition of 

properties and other purposes . 

On Oct. 4 the company’s board authorized acquisition of: 

the Crawfordsville Medical Office Park and Athens 

Surgery Center in Crawfordsville, Indiana, for $6.9 million; 

and the Southpointe Office Parke and Epler Parke I 

property in the Southport community of Indianapolis, Indiana, 

for $14.8 million. NNN said it expects to acquire the two 

properties about Jan. 19. 

Triple Net Properties, sponsor of NNN Healthcare/Office 

REIT, is a subsidiary of NNN Realty Advisors, 

a commercial real estate asset management and services 

firm. ■ 

Access Medical Device Daily Archives Online! 

You have FREE access to articles dating back to 1997 

— perfect for company research or for finding supporting 

data for presentations and reports. 

Go to www.MedicalDeviceDaily.com for access. 




Around the Beltway 

FDA to bar BSE-linked materials 

from devices, drugs, biologics 


The FDA is proposing to limit the materials used in 

some medical products in order to keep them free of the 

agent thought to cause mad cow disease, also known as 

bovine spongiform encephalopathy (BSE). 

The agency said that this is the latest in a series of BSE safeguards 

that would bar material that has been found to harbor 

the highest concentrations of this fatal agent in infected cattle. 

These materials would be prohibited from use as ingredients in 

medical products or elements of product manufacturing. 

The proposed rule would cover medical devices, drugs 

(prescription, over-the-counter, and homeopathic) and biologics 

(such as vaccines) intended for use in humans, as well 

as drugs intended for use in ruminant animals such as cattle 

and sheep. Cattle can get mad cow disease, while sheep can 

get a similar disease known as scrapie. 

“These measures build on a series of barriers FDA and the 

U.S. Department of Agriculture have erected to further protect 

humans from exposure to the fatal agent linked to BSE,” said 

Andrew von Eschenbach, MD, commissioner of the FDA. 

The cattle materials prohibited in the proposed rule are 

those that pose the highest risk of containing infectious 

material and include: the brain, skull, eyes and spinal cords 

from cattle 30 months and older; the tonsils and a portion of 

the small intestines from all cattle regardless of their age or 

health; any material from “downer” cattle — those that cannot 

walk; any material from cattle not inspected and passed 

for human consumption. 

The FDA proposes to require that records be kept to 

demonstrate that any cattle material used as an ingredient 

in these medical products or as part of their manufacturing 

process meet the rule’s requirements. 

Transmission of the BSE agent to humans, leading to 

vCJD, is believed to occur via ingestion of cattle products 

contaminated with the BSE agent; however the specific 

products associated with this transmission are unknown. 

About 200 cases of vCJD have been identified worldwide, 

including three cases in the U.S. However, there is no evidence 

that those three patients contracted the BSE agent in the U.S. 

Obesity surgeries on the rise 

Obesity surgeries for patients between the ages of 55 and 

64 in the U.S. soared from 772 procedures in 1998 to 15,086 surgeries 

in 2004 — a nearly 2,000% increase, according to a new 

report by the Agency for Healthcare Research and Quality 

(Rockville, Maryland). The report also found a 726% increase 

in surgeries among patients age 18 to 54. A total of 121,055 surgeries 

were performed on patients of all ages in 2004. 

AHRQ said that among the reasons for the dramatic 

increase is that mortality outcomes from obesity surgery have 

sharply declined. It said that the national death rate for patients 

hospitalized for bariatric surgery declined 78%, from 0.9% in 

1998 to 0.2% in 2004. Collectively known as bariatric surgery, 

these procedures include gastric bypass operations, verticalbanded 

gastroplasty, and gastric banding or “lapband.” 

Doctors may recommend bariatric surgery for patients who 

have a Body Mass Index of 40 or greater — a person who is 5 feet 

2 inches tall and weighs 276 pounds, for example — or a BMI of 

35 or more for patients who have serious, obesity-related medical 

conditions such as Type 2 diabetes or severe sleep apnea. 

The report also found that: 

• Patients ages 18 to 54 still account for the highest 

number of surgeries: 103,097 bariatric surgeries, 85% of the 

total. 

• Adolescents ages 12 to 17 accounted for 349 bariatric 

procedures in 2004. 

• Women have bariatric surgery more often than men. 

They accounted for more than 99,000 operations, 82% of 

the total. 

• The in-hospital death rate for men in 2004 was only 

0.4%, but it was 2.8 times higher than that of women. In 

1998, the in-hospital death rate for men was six times 

higher than that of women. 

• Gastric bypass surgery — which reduces the size of 

the stomach and bypasses a section of the intestines to 

decrease food absorption — accounted for 94% of bariatric 

procedures. 

• The average hospital cost for a bariatric surgery 

patient stay, excluding physician fees, was $10,395 in 

2004 as compared with $10,970 in 1998, adjusted for 

inflation. 

• The vast majority (78%) of bariatric surgery patients 

were privately insured. Only 5% of patients were uninsured, 

but their numbers increased by 810 percent over the 

period. 

• The overall hospital costs for bariatric surgery 

patients increased more than eightfold — from $147 million 

in 1998 to $1.3 billion in 2004. However, the average cost 

per patient decreased by 5%. ■ 

B RIEFLY 

N OTED 

Conference to explore 'nanomedicine' 

The nanotech community is invited to gather at Strategic 

Research Institute of ALM, for the “2nd Annual 

Nanomedicine: Commercializing Drug Delivery, Diagnostics 

and Medical Devices” conference March 26-27, in 

Arlington, Virginia. 

The event will consist of presentations, panels and networking, 

providing insights into trends and the commercial 

potential for nanomedicine. 

The conference website is: www.srinstitute.com/nano. 

The Strategic Research Institute is part of ALM's Conference 

and Trade Show Division. 




Private 

Continued from Page 1 

As examples of these transactions over the past year, 

he cited hospital operator HCA’s (Nashville, Tennessee) 

$33 billion acquisition, the acquisition of media giant 

Clear Channel (San Antonio) for $27 billion; casino operator 

Harrah’s (Las Vegas) for $26 billion, and the $11 billion 

buyout of orthopedics company Biomet (Warsaw, Indiana). 

“These mark some of the largest private equity transactions 

ever,” said Coyle. 

He noted that 30 of those transactions in 2006 in the 

U.S. were public-to-private “which dwarfs the number of 

public-to-privates that have occurred over the prior years 

and, again, they typically comprise the larger transactions.” 

Of those transactions, he noted about half as unsolicited 

— “and the vast majority of them, with very rare exceptions, 

have been successful. They have been met with acceptance 

by boards and shareholders and, on average, have commanded 

a 20% to 30% premium,” to there share price. 

He also noted that the market, from a multiples perspective, 

is now every bit as favorable to a private transaction 

as it is for going public. 

Coyle asked Tim Sullivan, who heads the healthcare 

practice at Madison Dearborn Partners, what public 

investors are missing that groups like his clearly see in the 

current environment. 

“We’re comfortable in leveraging the balance sheet of 

the companies [that we acquire].” Sullivan said. Secondly he 

noted that when it takes control of a company, the purchasing 

company is “bellying up to the bar and putting 

equity in the deal as well. The dialogue between ourselves 

and management is a very direct one.” 

If a company must reengineer, a private company has 

the advantage, he said. 

“To the extent that things don’t go as well as we 

planned, we’re going to be there to change and fix any 

problems. The public markets tend to have a more diffuse 

ownership, and I don’t think they can look to one person to 

enact those particular changes at the board level that we 

can do in a private realm.” 

Sullivan said that the premium prices paid for these 

companies are justified by the level of accountability that 

they can extract from management in a private situation, 

“particularly for companies that are typically out of favor. 

Everything today seems to be expensive, but the fact is 

we’re looking at businesses in many cases that the public, 

for whatever reason, has fallen out of favor with.” 

Jonathan Coslet, head of the healthcare practice at 

Texas Pacific Group, said that while there is accountability 

for private CEOs, their public counterparts have a much 

tougher time “and it should be difficult. The public companies 

have an imperative to perform and it’s incumbent 

upon the managing teams to deliver.” 

Many of the problems that these public officers have 

stem from the short-term shareholder expectations, particularly 

when hedge funds are thrown into the mix. So when 

these people come to manage private investments their 

mindset has to change. 

“When [officers] come into a private environment like 

ours, we have no ability to create value in a short time; we’re 

always going to be long-term investors and therefore, if it 

takes some time to make the investments in a long-term setting, 

we can do that, and quite frankly we have to do that.” 

Coslet also noted that private companies can avoid the 

inefficiencies that public companies deal with, particularly 

the hassle with Federal Trade Comission and accounting 

issues, allowing focusing on strategy and delivering results. 

Mike Michelson of Kohlberg Kravis Roberts & Co 

(KKR), agreed with other panelists in stressing the need for 

private equity firms to look at any acquisition as a longterm 

project. 

“We’re not constrained by current thinking and we’re 

not constrained by current earnings. In fact, we’re not really 

driven by earnings. Were driven much more by cashflow so 

I think we have a different lens that we can look through. 

We can work with management to set out a long-term 

strategic plan and execute along those lines.” 

In the healthcare sector, Michelson, a senior partner at 

KKR, said the private way of doing things can prove to be 

particularly advantageous, since there is less emphasis on 

long-term development goals vs. the short-term pressures 

of the public realm. 

Coslet characterized the healthcare sector as one of the 

“trickiest to invest in,” particularly if attempting to account 

for the ever shifting sands of Medicare reimbursement. At 

the end of the day, a company must determine its relative 

bargaining power within a local market dynamic, he said. 

Eventually, many of the going-private companies will 

return to the public sector, but Sullivan said this is not contradictory 

for the private equity firms, who are ultimately 

looking to gain cash liquidity from their investments. 

Michelson said that when contemplating a private investment, 

one must already be planning its best exit strategy. For 

HCA, for instance, there is strong likelihood that company will 

eventually be back in the public sector, he predicted. And he 

noted “multiple avenues,” from taking a company public, to 

selling to a strategic buyer, to recapitalizations. 

Michelson quipped that it doesn’t take “a genius to pay 

the most money for a company,” and that what happens 

after the buy is the most critical element for success. “Given 

the long holding periods [an average of seven years} that 

we have, it’s very difficult to generate the kind of returns 

that we’re looking for through simple financial engineering. 

You really have to work with the company to improve that 

company over time.” 

Sullivan said something in the range of “20% or better” 

defines a good investment. The trick, he said, is to 

be a diversified. A healthcare investment “is a very different 

kind of investment . . . from others that we are 

very active in.” ■ 




Costs 


less “the third consecutive year of slower health spending 

growth,” largely driven by increased expenditures for prescription 

drugs. 

The total comes out to roughly $6,700 per person, and 

all healthcare spending consumed 16% of total GDP, a fine 

hair higher than the 15.9% of the previous year. 

Catlin said that the current economic theory explaining 

healthcare spending does a good job of accounting for the 

more rapid jumps in these costs seen in the relatively 

slower economic environment of 2001-03, “when the 

healthcare share of GDP increased 2%.” 

Healthcare spending trends ordinarily display “a lagged 

relationship with economic cycles,” Caitlin explained. 

Healthcare spending plays the traditional role of a deadening 

buffer to cyclical slowdowns in GDP growth “in part,” he 

said, “because public spending for health, particularly Medicaid, 

accelerates during recessionary periods. This counterrecessionary 

trend, combined with the labor-intensive nature 

of the healthcare industry, creates healthcare jobs at a time 

when employment in other industries is declining.” 

As this effect worked its way through the economy, 

overall spending slowed as the “lagged effects of the 2001 

recession that took time to work its way through the health 

sector’s institutional structure,” Caitlin said. 

Catlin showed a slide that matched GDP growth against 

healthcare spending growth, which depicted a similar trend 

in their respective rates of growth. 

“What’s uncertain at this time is whether the convergence 

is temporary, as we saw before the 1990s — or a 

long-term trend, such as we saw in the mid-1990s.” 

Hospital care and physician and clinical services 

accounted for just over half of all spending in 2005, according 

to Caitlin’s numbers, and he pointed out that “hospital 

spending grew relatively quickly, and accounted for the 

largest share” of the increase in 2005 at more than 7.9%. 

Seemingly paradoxical — considering the boost in hospital 

spending — was that home healthcare also registered 

substantial growth. For the third consecutive year, home 

healthcare spending jumped by double digits, rising by 

more than 11% in 2005. 

Spending on pharmaceuticals, on the other hand, was 

not as rapid in 2005 as in previous years, climbing 5.8% 

after a jump of 8.6% in 2004 and double-digit rises in 2003 

and previous years. 

Catlin said that the smaller number of new drugs and 

increased co-pays were major factors in the drop in drug 

spending growth. 

Cathy Cowan, also an economist with the National 

Health Statistics at CMS, was the second presenter at the 

briefing, and she noted that “public spending did slow down 

slightly.” But she said that private insurance premiums went 

up 6.6% in 2005, which helped slow growth. “At this time, the 

effect of consumer-driven health plans is likely to be minimal, 

as less than 1%” of the population is enrolled. 

Medicare grew 9.3%, down from more than 10% the previous 

year, mostly because of lower growth in hospitals, 

Cowan noted, and much of that “was the result of increases 

in volume and intensity of services.” 

Medicaid was up 7.2% in 2005, part of four years of 

decelerating growth due to cost control programs such as 

fraud and abuse and disease management, but also, as 

alluded to in Catlin’s presentation, due to an improving 

economy that brought some enrollees off Medicaid. 

In 2005, governments financed 40% of healthcare services 

and supplies, and households coughed up 31%. And 

Cowan noted that “the share of federal receipts dedicated 

to healthcare has grown from 16% in 1990 to 30% in 2005.” 

On the other hand, the percentage of household income 

dedicated to healthcare “has been essentially flat,” Cowan 

said, rising from 5.4% in 2001 to only 6% in 2005, 

Sam Zuvekas, a senior economist at AHRQ, who coauthored 

the paper on prescription drug use patterns, 

noted that as always, “healthcare spending is highly concentrated 

among a small portion of the population,” but 

that concentration “has declined since 1996 after being 

“remarkably stable for decades.” 

“The first national study of this type found that the top 

5% accounted for 52% [of spending] in the 1920s,” while the 

top 5% generated 55% of spending in 1977, down to 

49% in 2003, he said. 

Much of this change was due to the fact that “more and 

more Americans are living with heart disease and other 

chronic conditions,” which helped generate especially rapid 

increases in drug spending, rising from 12% to 20% of all 

healthcare spending between 1996 and 2003. Drug spending 

will likely get a boost from Medicare Part D, but how 

much “will likely take a couple of years to fully work out.” 

Zuvekas said that he did not have any numbers that 

indicate whether the share of total healthcare expenditures 

incurred by use of medical devices has gone up because 

“we have not looked at this for this activity.” 

On the other hand, he pointed out that although the 

FDA is slower to clear devices than many other foreign 

agencies, “adoption of medical technology happens a lot 

faster in the U.S.” than in most other nations. 

But he provided a caveat to this observation: “Whether 

we’re getting what we pay for is another question.” ■ 

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International 


maternal plasma or serum, as well as short nucleic acids 

in blood, plasma or serum, for the analysis of cancer and 

other key disorders.” 

The reagents are expected to provide complete and 

validated preanalytical solutions for research use with 

compatibility for potential future use in conjunction with in 

vitro diagnostics. 

Fetal DNA enrichment is the process of increasing the 

concentration of fetal DNA relative to maternal DNA from 

blood plasma or serum obtained from a simple blood draw 

from a pregnant woman. The companies call robust fetal 

DNA enrichment “a key step” for enabling certain non-invasive 

prenatal diagnostics. 

While robust enrichment of fetal DNA is not necessary 

for many non-invasive prenatal nucleic acid tests such as 

tests for Rhesus D incompatibility, Sequenom said it is 

required for quantitative genomic tests such as tests for 

Down syndrome, cystic fibrosis and other phenotypes, conditions 

or disease states. 

“We are looking forward to contributing our expertise 

toward developing this important preanalytical 

technology for Sequenom’s prenatal diagnostics program,” 

said Peer Schatz, Qiagen CEO. “[Our] QIAamp 

product line is the clear standard for processing DNA 

from maternal plasma to analyze fetal Rhesus D. 

Through this collaboration with Sequenom, we expect 

to tailor and expand existing capabilities of our DNA 

processing expertise to provide a solution to routinely 

address tests for conditions such as cystic fibrosis, 

Down syndrome and Tay-Sachs, by non-invasive prenatal 

diagnostics.” 

Harry Stylli, PhD, president/CEO of Sequenom, said, 

“Non-invasive molecular diagnostics modalities will 

play an increasingly important role in supporting a new 

generation of diagnostic products for a range of critical 

disorders. Sequenom intends to develop a viable and 

robust platform initially for non-invasive prenatal diagnostics 

that can be leveraged to other applications 

based on the detection and characterization of small 

nucleic acids.” 

He said the company’s MassArray technology’s 

“acutely high sensitivity and precision should be advantageous 

for enabling the development of the challenging 

tests that we are currently working on and plan to work on 

in the future. We are excited by the potential of this collaboration 

with Qiagen.” 

Separately, Sequenom reported that through its South 

Korean distributor, Bioneer, the company sold three MassArray 

genetic analysis systems in the region during 1Q06, 

including a sale to the Republic of Korea’s National Cancer 

Center. 

Bioneer was named as the exclusive distributor and 

promoter of Sequenom’s genetic analysis products for 

South Korea in September. Bioneer also operates a core 

facility that provides contract services for human, livestock 

and agricultural applications throughout South 

Korea using Sequenom’s MassArray system and consumable 

products. 

Under its relationship with Sequenom, Bioneer offers 

MassArray-based product and service solutions for fine 

mapping genotyping, gene and biomarker discovery, validation, 

screening, DNA methylation marker pattern analysis 

(epigenetic studies) and quantitative gene expression 

analysis. 

“These sales represent the increased demand we are 

seeing in South Korea for fine mapping genetic analysis 

solutions and for life sciences research tools in general,” 

said Dr. Han-Oh Park, president/CEO of Bioneer. 

“Sequenom’s products and our service offerings . . . are 

especially well suited for fine mapping genotyping, a market 

that is emerging in South Korea as researchers complete 

their whole genome studies.” 

He added: “Sequenom’s products are similarly attractive 

for DNA methylation pattern and gene expression 

analysis projects being conducted by prominent cancer 

research centers.” 

Qiagen, U.S. firm in co-marketing plan 

In other Qiagen news, the company and Pathway 

Diagnostics (Malibu, California), a firm developing 

biomarker and testing services for the pharma industry, 

reported entering into a co-marketing partnership 

that allows customers in the biotech and 

pharma industries to use Qiagen’s sample and assay 

technologies in combination with Pathway Diagnostics’ 

clinical development and testing service capabilities. 

The Dutch company’s global pharmaceutical sales 

channel and resource network will develop opportunities 

addressed together with the service capabilities of Pathway 

Diagnostics. 

The companies said the global pharma industry is 

accelerating its focus on the co-development and co-validation 

of biomarker assays intended to improve drug 

development via patient selection and clinical trial outcomes, 

accelerating time-to-market cycles for new drugs 

and reducing clinical trial costs. 

Biomarker development also may lead to companion 

diagnostic products used as a prerequisite for therapeutic 

intervention. 

“This partnership with Pathway Diagnostics . . . 

offers a novel and unique value proposition for our 

customers,” said Peer Schatz, CEO of Qiagen. “[We] 

share the vision that biomarker development and testing 

is at the forefront of accelerating drug development 

and providing clinical diagnostic value, leading 

to improved patient care and associated therapeutic 

intervention.” ■ 




RoundTable 


investment were not disclosed. 

“We are excited about the combination of Advantis and 

Instrumed to form Avalign,” said Joseph Damico, a founding 

partner of RoundTable and now chairman of Avalign. “We 

are impressed with Advantis’ design and engineering capabilities 

and its strong commitment to quality and customer 

service. These core competencies, combined with 

Instrumed’s expertise in manufacturing and sourcing precision 

surgical instruments, will position Avalign as a leading 

full-service provider of outsourced services to medical 

device OEM customers.” 

With the formation of Avalign, RoundTable reported 

that Forrest Whittaker has joined as Avalign’s CEO. Whittaker 

previously served as president/COO of Teleflex 

Medical and in various executive roles at Tyco Healthcare, 

Baxter Healthcare and American Hospital Supply. 

RoundTable facilitated completion of new senior credit 

facilities and a private placement of subordinated notes. 

The senior credit facilities were led by LaSalle Bank; GE 

Healthcare Financial Services also participated in the transaction. 

Avalign’s senior subordinated notes were purchased 

by RoundTable Capital Partners, RoundTable’s $200 

million captive subordinated debt fund. 

RoundTable is a private equity firm focused on healthcare. 

• AngioDynamics (Queensbury, New York) and Rita 

Medical Systems (Fremont, California) reported expiration 

of the Hart-Scott-Rodino waiting period in connection 

with AngioDynamics’ acquisition of RITA. 

Closing of the merger, about Jan. 29, remains subject to 

customary conditions, including adoption of the merger by 

holders of RITA’s common stock, and approval of the 

issuance of AngioDynamics common stock by holders of 

AngioDynamics’ common stock. The meetings of the companies’ 

stockholders are set for 9 a.m. PST, Jan. 29, in Fremont. 

AngioDynamics is a provider of medical devices for the 

minimally invasive diagnosis and treatment of peripheral 

vascular disease. Its product line includes angiographic 

products and accessories, dialysis products, vascular 

access products, PTA products, drainage products, thrombolytic 

products and venous products. 

RITA makes products that provide oncology therapy 

options for cancer patients including radiofrequency 

ablation (RFA) systems and embolization products for 

treating cancerous tumors, as well as percutaneous vascular 

and spinal access systems for systemic treatments. 

The company’s oncology product lines include 

implantable ports, some featuring its Vortex technology; 

tunneled central venous catheters; and safety infusion 

sets and peripherally inserted central catheters used in 

cancer treatment. ■ 

Court Report 


while not disclosing “the complete details of the settlement.” 

MarcTec had asked the court to declare that its 

patents are valid, enforceable and infringed, and 

requested a permanent injunction to stop the manufacture 

and sale of the infringing product, as well as damages, 

attorneys’ fees and costs. 

• Third Wave Technologies (Madison, Wisconsin) 

last week responded to a lawsuit filed against it by Digene 

(Gaithersburg, Maryland), alleging that Third Wave is 

infringing unidentified claims of U.S. Patent No. 5,643,715, 

relating to a single HPV type, 52, the prevalence of which is 

0.5% of HPV-positive specimens in the U.S., according to 

Digene’s package insert. 

The suit was filed in U.S. District Court for the Western 

District of Wisconsin in Madison. 

Kevin Conroy, president/CEO of Third Wave, said, “We 

took great care to create a detection method free from the 

limited scope of the ‘715 patent’s claims. Third Wave’s 

Invader chemistry operates differently from any other 

nucleic acid analysis chemistry and is well-protected by 

intellectual property rights of its own. 

He added: “Customers tell us that Digene’s test suffers 

from many challenges, and Third Wave’s dedicated 

team of scientists has developed HPV products, currently 

in clinical trials, that address those shortcomings 

and better meet the needs of clinical labs, physicians 

and their patients.” 

Third Wave develops molecular diagnostic reagents for 

DNA and RNA analysis applications. 

• Perry Hearn, MD, of Norwell, Massachusetts, has 

agreed to pay $150,000, and Affiliated Professional Services 

(APS; Wareham, Massachusetts), a medical billing 

company, has agreed to pay $100,000, to settle allegations 

that they submitted false claims to the Medicare and Medicaid 

programs for office and nursing home visits performed 

by nurse practitioners and physician assistants 

without any physician supervision. 

“We cannot permit healthcare providers to cause the 

Medicare and Medicaid programs to pay more than is 

necessary, or more than is deserved given the actual service 

provided,” said a U.S. attorney in charge of the case. 

According to the charges, while the nurse practitioners 

and physician assistants on Hearn’s staff commonly 

worked without any physician supervision, Hearn 

instructed APS to bill all of their services under his provider 

number, as if he had performed the services or had directly 

supervised them. APS allegedly did as instructed, even 

though it had information that Hearn’s nurse practitioners 

and physician assistants often did not work under physician 

supervision of a physician. 

Hearn has entered into a compliance program with the 

Office of the Inspector General for the Department of 

Health and Human Services. ■ 




P RODUCT B RIEFS P EOPLE IN P LACES 

• Iapyx Medical (San Diego) Thursday introduced 

its Iso-Line Suction Wand Holster System, an infection 

control product designed to isolate suction wands to 

minimize the transmission of pathogenic organisms 

(viruses, bacteria, and fungi) in a hospital setting. 

According to a study published in the American Journal 

of Infection Control, 80% of oral suction wands can be 

contaminated with highly pathogenic bacteria and fungi 

which can contribute to serious hospital-acquired infections. 

Typically, these wands are placed under the 

patient’s pillow or on other hospital equipment increasing 

the risk of infection to both patients and healthcare 

workers. The Iso-Line is mounted onto the patient’s 

bedrail, hospital stand or ventilator, and includes a rigid 

disposable holster that isolates the suction wand from 

surface contact, thereby reducing the transmission of 

infectious pathogens. The holster is designed with a 

secretion reservoir that allows blood and mucus to drain 

away from the tip of the suction wand. Iapyx Medical 

produces single-use medical devices designed to combat 

hospital-acquired infections. 

• Illumina (San Diego) reports that the next Bead- 

Chip in its Infinium product family will profile over 

one million genetic variants. The Human 1M BeadChip 

combines a level of content for both whole-genome 

(WG) and copy number variation (CNV) analysis, along 

with additional unique, high-value genomic regions of 

interest – all on a single microarray chip. Illumina also 

announced that it plans to introduce the Human 450S 

BeadChip, which will enable customers using Illumina’s 

HumanHap550 BeadChip to further extend 

their genetic studies to include the one million content 

level. The Human 1M and Human 450S BeadChips 

will be powered by Illumina’s Infinium Assay. Both 

products are expected to enter the market by the 

close of the second quarter, 2007. Illumina makes 

tools for the large-scale analysis of genetic variation 

and function. 

• Medtronic (Minneapolis) reported the release of its 

newest version of the Paceart System. The latest edition 

of Paceart further supports clinicians with solutions 

designed for the management of patients with cardiac 

rhythm disease. The system consolidates detailed data 

from in-clinic device interrogations from the major 

implantable cardiac device manufacturers, and also 

remote management technologies. Paceart supports the 

management of data for more than 1,000 implantable cardiac 

devices. In addition, Paceart serves as a single integration 

point, reducing the number of interfaces and 

information technology resources needed to share information 

electronically with other systems. 

• Steven Wardell has been named executive VP of 

finance and corporate development of NorthPoint 

Domain (Boston). Wardell was previously with Apeiron 

Partners. NorthPoint Domain provides medical information 

services and informed care technology products. 

• William Osgood was named general manager, operations 

for ThermoGenesis (Rancho Cordova, California). 

Osgood previously served as senior VP of Sorin 

Group. ThermoGenesis makes automated blood processing 

systems and disposable products that enable the manufacture, 

preservation and delivery of cell and tissue therapy 

products. 

Cunniffe joins AdvaMed, 

will lead advocacy efforts 


Amy Cunniffe will join the Advanced Medical 

Technology Association (AdvaMed; Washington) 

today as senior executive VP and director, government 

affairs. AdvaMed said she will be responsible for leading 

the association’s advocacy efforts with Congress, the 

administration and state governments. Cunniffe specializes 

in healthcare policy and has worked for congress 

and the Bush Administration. 

“Amy’s reputation as a leader in national health policy 

is exceptional,” said Steve Ubl, president/CEO of 

AdvaMed. “I am thrilled to have her on with us at a time 

when issues of critical importance to medical technology 

are being considered by Congress and the regulatory 

agencies.” 

Cunniffe joins AdvaMed from Quinn Gillespie and 

Associates, where she led the firm’s healthcare practice. 

Prior to that, she worked in the White House as special 

assistant for legislative affairs for President Bush. Earlier 

in her career, Cunniffe was health and social security policy 

advisor to then House Speaker Dennis Hastert (R-IL). 

Before joining the Speaker’s office, Cunniffe was a policy 

analyst for the Majority Whip. She also has trade association 

experience, having served as director, federal public 

policy at the National Federation of Independent Business. 

Ubl said Cunniffe will work with AdvaMed’s senior 

executive vice president, David Nexon, in leading the 

association’s government affairs strategy and policy priorities. 

“The combination of Amy Jensen Cunniffe and 

David Nexon is a powerful, bi-partisan force for 

AdvaMed,” said Ubl.

s&n says - Medical Device Daily

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