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OrthopaedicProductNewsJanuary/February 2007

Enquiry No 3

SURGEON AS ENTREPRENEURThe Cost of Obtaining a PatentAuthor: Perry E. Van Over, EsquireMy earlier articles included the Golden Rules of patent law, which wereintended to provide a roadmap for the inventor as he navigated the complicatedpathway to patent protection. Subsequent articles addressedassignments, licenses, record keeping, patent prosecution and factors toconsider when choosing a patent attorney. While those earlier submissionswere intended to provide an appreciation of the inventor’s continualrole in the whole process, they did not address one of the first questionsasked by most surgeon inventors in their initial conversation with apatent attorney: “How much will it cost to obtain a patent?” This articleattempts to answer that question and to provide an understanding of howthat monetary investment is spent.When a new client asks that cost question, the initial response isoften,“It depends on a number of things that are difficult to predict.” Thatdisappointing non-answer is quickly followed by a hurried explanationof some of the variables that can influence the cost. After this, the newclient still doesn’t feel better about the inexactitude of the estimate—buthopefully understands why it is so.The expense of obtaining and maintaining the patent can be separatedinto three basic cost areas: government fees, legal services fees andincidental support costs such as figure drafting costs, contracted searchfees and copying, mailing, faxing, conference calls and the like. Certaincosts, such as the government fees charged by the U.S. Patent andTrademark Office (USPTO) or the International Filing Authority or othernations’ patent offices are clearly set down by regulations and schedules.Other costs, such as the expense for precise patent drawings that meet allof the requirements of the U.S. and other nations’ patent offices, can alsobe predicted with some degree of certainty. Finally, estimating the fee tobe paid to the attorney for his legal services must be factored into thetotal costs estimate. The attorney’s or patent agent’s fee is usually basedupon an hourly billing rate that should be disclosed before the attorneyclientrelationship begins. This latter rate can vary considerably for reasonswhich will be discussed later.Given that the government fees are certain, professional drafting feesare relatively predictable and attorneys’ legal service fees are based upona disclosed hourly billing rate, it seems that providing an estimate of thetotal costs for the patenting process should be possible with a high levelof certainty. Unfortunately, that is not always the case. The invention’scomplexity, the fluid nature of the technology and unpredictable eventssuch as newly found, closely related prior art can occur during differentphases in the patent’s life. All can contribute to the lack of certainty of thecosts involved and can even affect, whether a Letters Patent for the inventionwill ultimately be issued and then survive until its date of expiration.The process and costs can be divided into three phases: pre-filing,prosecution period, and the patent term.Pre-filing begins with the date of the invention’s conception and endswith the date that the utility patent application is filed. During this period,legal services fees for preparing the patent application will be paid.Additional fees, such as for prior art search and possibly figure draftingcan also be required in this initial pre-filing period. The period ends withthe filing of the patent application and the payment of the governmentrequired filing fee.Preliminary to the attorney spending time drafting an application, asearch of the prior art will be conducted. The attorney can be assisted inthis effort by the inventor, who may be able to provide a list of patents orpublications which describe the closest known prior art to that of thepresent invention. From this, the patent attorney can conduct an informalsearch for additional prior art, the purpose of which is to enable the attorneyto draft an application that carves out the broadest possible claimsand clearly distinguishes the invention from conventional devices. Thiswill generally consume a few hours of the attorney’s time but will paydividends, in that the attorney will have a deeper understanding of theinvention and how to distinguish it from those devices which are publiclyknown. Alternatively, a formal search can be done which is commissionedby the attorney to a professional search company. Generally, sucha search can cost between $500 to $2,000 depending upon the complexityof the invention and the amount of prior art in the technical field. If aformal prior art search is conducted, a written or verbal patentabilityopinion can be offered to the inventor. The additional costs of such anopinion will depend upon the number of hours expended by the patentattorney in studying the found prior art and preparing the opinion. Theamount of time required is dependent upon the complexity of the inventionand number of pieces of prior art found that require the attorney’sanalysis and opinion. The costs of a patentability search and opinion canrange from $1,000 to $3,000 or more as the complexity of the inventionand the amount of found prior art increases.Among the many reasons for variability in attorneys’ fees is the attorney’slocation. Patent attorneys in major high-cost urban areas (NewYork, Boston, San Francisco, Los Angeles, etc.) can be expected to billat higher hourly rates commensurate with overhead costs associated withsuch locations. Additionally, the higher overhead associated with largerlaw firms’ large support staffs can result in higher rates. The experiencelevel of the patent attorney is another major factor in determining thehourly billing rate. As I’ve indicated in the past, if work is delegated to ajunior associate or a patent agent, the billing rate can be substantiallylower; however, it is important not to choose an attorney simply becauseshe is the least expensive. A patent application drafted and prosecuted bya more experienced attorney may cost a little more per hour for that attorney’stime, but the value added to the application can pay tremendousdividends over a less aptly-drafted patent. In many cases, the bulk of thework can be done by the less expensive associate or agent under thesupervision of a more experienced attorney. In such cases, concernshould be given as to how much or how little supervisory time is actuallybeing invested on your behalf by the more knowledgeable seniorcontinued on page 86Orthopaedic Product News • January/February 2007

Enquiry No 4

ARTICLEcontinued from page 10Payers – Interest in ASCs has grown as managed care organizationshave sought a cost-effective alternative to inpatient services.ASCs can provide more competitive pricing to commercial payerswhich is inherent in the model’s lower cost structure. FreestandingASCs saved Medicare approximately $1.1 billion in 2005 overhospital-based ASCs. (Source: The Moran Company StudyConducted for the Federated Ambulatory Surgery Association)Essential factors that drive the model include:Technology – Improvements in surgical technology and anestheticagents allow surgical procedures to be performed in less acutesettings and have significantly expanded the types of surgicalprocedures that can be performed in ASCs.environment less efficient, stifling their productivity, but they don’t haveownership in the business. With declining incomes and a litigioussociety, physicians must take control of their surgical environment,which includes ownership of the business. According to FASA, somelevel of physician ownership exists in more than 90 percent of ASCs inthe U.S. (See Exhibit 3.)Lower Cost – Ambulatory surgery performed at a free-standing ASC isgenerally less expensive than hospital-based ambulatory surgery for anumber of reasons, including, lower facility development costs, moreefficient staffing and space utilization, and a specialized operatingenvironment focused on cost containment. Procedures performed in anASC generally cost between 30 to 60 percent less than the sameprocedures performed in a hospital setting. (Source: InformedHealthcare Media, LLC, 2006)Minimally Invasive Surgical Techniques – The race is on formedical device companies to develop minimally invasive surgicalimplants, instruments and surgical techniques in all subspecialtysurgeries. Significant technological advancements are emerging inorthopaedic, spine and total joint procedures as well asneurosurgery, cardiology and gastroenterology.Demographics – The aging of the 79 million Baby Boomers createssignificant growth in the “over 55” segment of the U.S. population andwill be a driving force in the demand for outpatient surgical services.Cost to Build an ASCThe cost to develop a new ASC is approximately $1 million peroperating room. Costs for a small single specialty center with two surgicalsuites range from $2 to $ 3 million and $4 to $8 million for a larger multispecialtyASC. Typically, the majority of the costs associated with development,including the tenant improvement construction cost and surgicalequipment, can be leveraged by debt. The need for equity is isolated toworking capital, which is typically four to seven months of operatingexpenses totaling $750,000 to $1 million. Raising capital between physicianpartners and corporate partners is relatively easy to accomplish. The investmentranges from $7,500 to $15,000 for a 1 percent interest in the partnershipplus assumption of pro-rata debt dependent on debt structure.Business OpportunityAccording to our research from a variety of industry sources, theaverage multi-specialty ASC has approximately 12 physician partners,each with approximately three percent ownership, and generates approximately$4 million in net revenue and $1.2 million in EBITDA.Ownership per physician tends to increase in a single specialty ASC.Physician Equity ParticipationPhysicians currently performing surgical cases in a hospital inpatientor outpatient setting are potentially losing on all fronts. Not only is theTypes of OwnershipExhibit 3. ASC Ownership MetricsPhysicians may own the ASC entirely or may partner with a hospitaland/or corporation in some combination. Positives and negatives arepresent for both approaches.All Physician – Physicians are busy being physicians and theiradministrators are busy running practices, so who develops andoperates the surgery center? Many times, physicians will hireconsultants to navigate its development and initial setup. Once thecenter is operational, however, consultants move on, leaving thesurgery center to run itself. As with all businesses, ASCs typicallydon’t run well without dedicated management.Hospital and Physician – The overarching benefit of this model isthat you have a partner with whom to share the risk. Typically, thecommunity hospital has capital and the ability to secure insurancecontracts at attractive rates. The challenge to this model is the“trust factor”—that is, many physicians simply don’t trust hospitalmanagement. At the same time, physicians have diluted ownershipby bringing on a hospital partner. Most hospitals desire a structurethat allows the hospital to maintain a majority ownership in thesurgery center. According to 2004 data, hospitals have ownershipinterest in 21 percent of all ASCs. (Source: 2004 ASC Salary andBenefits Survey, Federated Ambulatory Surgery Association,2004)Corporation and Physician – Approximately 30 companies are inthe business of partnering with physicians to develop, own andmanage surgery centers. Of the 4,500 Medicare-certified U.S.ASCs, only 837 facilities (less than 20 percent) are owned andmanaged by multi-facility chains. (Source: Informed HealthcareMedia, LLC 2006) In this model, physicians benefit from having astrong capital partner to ensure that their return on investment isbased on the success of an excellent plan and well-run business.The corporate partner has experience in budgeting, financialanalysis, human resources, technology, clinical benchmarking andmarketing. This allows the physicians to focus on surgery and thecorporate partner to focus on business. Aligned incentives ofcontinued on page 12January/February 2007 • Orthopaedic Product News 11

ARTICLEcontinued from page 11ownership work well in many partnerships. The risks inherent tothis model are intense competition from local hospital systems andstrained relationships with hospital administration once thesurgical cases move to the ASC.Three-Way Partnership – Popularized by United Surgical PartnersInternational and the Baylor Health Care System, this modelcombines the interests of physicians, hospital and a corporatepartner. The benefit of this model is that the two parties thattypically don’t trust each other now have a third independentpartner to operate the business in the best interest of all partners.This model eliminates tension between the physicians andhospital, adds a strong capital partner and provides the ASC withinsurance contracts. Meanwhile, the day-to-day operations aredriven by an independent corporate partner and access to hospitalvolumes is strong. The caveat is that the hospital must haveevolved its strategy to the point that allows such a joint venture;otherwise, physicians will waste significant time trying toassemble this type of partnership.Specialty Surgical Hospitals (SSHs)Specialty surgical hospitals offer both inpatient and outpatientservices for a specific specialty (e.g., cardiac, orthopaedic or psychiatric)or type of patient (e.g., children or women). The facilities and care aretailored to meet the needs of the specific condition, patient or procedureon which the SSH is focused.Specialized care is not necessarily a new development in the surgicalfacilities industry, as pediatric and psychiatric hospitals have existed foryears. More recently, however, a number of cardiac, orthopaedic andsurgical hospitals have been or are being built. There are still relativelyfew SSHs, but the number has tripled from 31 in 1997 to 133 in 2004, asExhibit 4 shows.Physicians relish the opportunity provided by SSHs. The SSH offersa chance to improve the delivery of care by redesigning the process andcreating a more efficient and effective system. The model is a consumerfriendlyresponse to the desire for convenient access, enhanced customerservice and state of the art designs with the efficient operations consistentwith an outpatient surgical facility.SSHs are emerging as the facility of choice by physicians, patientsand payers for cases that require stays up to 72 hours. According toMedPac’s August 2006 Final Report to Congress, these surgery-onlyfacilities maintain 14 or fewer beds and house minor and complexoutpatient procedures including neurosurgical, spinal and total jointreplacements. Larger than ASCs, these facilities provide a greater rangeof services such as diagnostic imaging, pharmacy, laboratory, dietaryservices and rehabilitation.Final Report to Congress – Specialty HospitalsAs a part of the Medicare Modernization Act of 2003, Congressplaced an 18 month moratorium on physician investment and referrals tospecialty hospitals for facilities in operation after November 18, 2003,reflecting sensitivity over potential physician self-referral issues. Themoratorium expired on June 8, 2005, but the Centers for Medicare andMedicaid Services delayed the review of any new license until August2006. MedPac was commissioned to study the impact of the SSH oncommunity-based hospitals and issued an initial report in September2004, with a final report August 2006. The moratorium was lifted inAugust 2006. Currently there is no restriction on physicianownership in specialty hospitals.Clinical ResultsAs reported recently in three publications, clinical results rate high inspecialty hospitals.● Sioux City Journal, Dakota Dunes, South Dakota, October 17,2006 – According to HealthGrades, the industry’s leading ratingscompany (2007 ratings), Siouxland Surgical Center is the onlyhospital in South Dakota ranked in the top ten percent of allhospitals nationally and number one in South Dakota for spinalsurgery. Siouxland is a 20-bed licensed SSH.Exhibit 4. Specialty Surgical Hospital Growth: 1997 to 2004The emergence of SSHs is in response to a demand created fromfrustration with general acute care hospitals that are perceived as unresponsiveto the desires of physicians and patients. Many of the same market andenvironmental factors that have driven the growth of the ASCs have alsoencouraged the recent development of specialty surgical hospitals.These specialty hospital facilities combine the best features of anASC, including accessible location and layout, adherence to scheduling,convenience for patients and physicians, less expensive, focused on alimited set of surgical procedures, short stays and potential for physicianownership.● Columbus Business First, Columbus, Ohio, November 24, 2006 –New Albany Surgical Hospital reports that the hospital is one of 14inpatient facilities in the nation to receive the Summit Award fromPress Ganey Associates, Inc., a South Bend, Indiana, company thathelps health care facilities measure and improve patient satisfaction.Summit awards go to hospitals ranked in the 95th percentilefor patient satisfaction for at least three straight years in PressGaney’s 1,600-hospital database. New Albany is a 42-bedorthopaedic surgical hospital.● Aberdeen News, Dakota Plains, South Dakota, October 17, 2006– According to a study released by HealthGrades, Dakota PlainsSurgical Center is the number one provider of joint replacementsurgery in South Dakota. In addition, the center was ranked amongthe top five percent in the nation in total hip and total knee replacementand was given a five-star rating – the highest award – forclinical quality outcomes for the fifth year in a row. Dakota Plainsis an eight-bed hospital.continued on page 1412 Orthopaedic Product News • January/February 2007

Enquiry No 6

ARTICLEcontinued from page 12Comparison of AlternativesExhibit 5 shows a comparison of alternatives that must be consideredwhen deciding between an ASC and SSH, compared to the traditionalhospital model.Exhibit 7. Comparison of ASC and SSH ModelsProject Scope Drives Cost and Cost Drives InvestmentSome critical points to consider related to the cost of a project and theinvestment required include:Exhibit 5. Site of Care ComparisonsSome key statistics for orthopaedic and surgical hospitals appear inExhibit 6.Number of Hospitals 64Average Number of Beds 14Annual Admissions 649Occupancy 28%Inpatient Charges 32%Medicare Share 33%Medicaid Share 2%Average Initial Investment Per Physician $98,000Average Number of Investors 25Average Ownership Share Per Physician 3%Average Aggregate Physician Ownership 67%Return on Invested Capital 34%Hospital Income per Physician $50,000(Source: MedPac August 2006 Report to Congress – Physician OwnedSpecialty Hospitals Revisited)Cost ComparisonExhibit 6. Specialty Hospital MetricsThe costs of constructing an average ASC versus a SSH are shown inExhibit 7. While there is dramatic difference between the net revenuegenerated in a SSH versus an ASC, there is considerably more expenseassociated with constructing a SSH.Surgical Case Volume – Inpatient and outpatient case mix…what isthe net case count? This information is critical in the planning process,as it determines the net revenue the business will generate plus thescale of the facility needed to accommodate the surgical cases.Insurance Contracting – Can the facility secure insurancecontracts? If not, do you have an out-of-network strategy? Thebusiness may have a strong number of surgical cases, but if youcannot get paid for the work performed, it is a potentiallydevastating blow to cash collections. You must have a plan forreimbursement prior to construction of the facility.Ancillary Business – Do the physicians considering the projectalready own MRIs, CTs, etc.? Does that need to be included in theSSH project? Don’t assume that because you have implementedimaging services they will be utilized, particularly if most of thepartners already have investment in MRI and related imagingservices.Project Scope – Be careful to not overbuild. This is perhaps thenumber one reason for failure. It is easy to overbuild a facility wellbeyond capacity, creating undue stress on the financial performanceof the business. Better to under-build and expand later.Partnership – Does it make sense to have separate partnerships forthe real estate versus the operating entity? Consider separatepartnerships for the real estate from the operating entity. The realestate provides a different investment opportunity.Equity – Be sure that enough cash is committed to the project. Acommon problem has been the lack of cash in the crucial start-upphase. It is easy to miscalculate the cash needs and be forced toinitiate capital calls from the partnership to meet cash needs in thefirst 12 months of the project.continued on page 1514 Orthopaedic Product News • January/February 2007

ARTICLEcontinued from page 14Debt – Be sure you have a commitment for financing prior tostarting the project. Rates may vary between sources – so, shop thefinancing among numerous financial institutions.The basic steps required in the planning process are illustrated inExhibit 8.ConclusionThe number of ASCs continues to grow as a result of the demand bythe key participants in the industry – physicians, patients and payers. Thehigh levels of patient satisfaction, physician efficiency and lower costsare all associated with this innovative model. Technology continues toimprove the prospects for shifting more surgical procedures to an ASCsetting.Physicians have led development of ASCs and are currently leadingdevelopment of SSHs for exactly the same reasons. Both settings providephysicians with control over their surgical environment, which mitigatesthe daily frustrations of working in an inefficient environment. Plannedand implemented properly, the surgical facility provides the physician,patient and payer a model that “changes the game” for the betterment ofhealth care.Kenneth Hancock is Co-founder, President and Chief DevelopmentOfficer of Meridian Surgical Partners. Meridian, located in Nashville,Tennessee, is a surgical facilities company focused on acquisitions,development and management of physician-owned surgical facilities. Hecan be reached at khancock@meridiansurg.com.Enquiry No 38Exhibit 8. The Project Planning ProcessQuestions That Need Answers - The Decision TreeHow does a physician decide what type of facility is in her bestinterest? Obviously, many factors should be considered; however, thedriving factor is always centered on the number of surgical cases andassociated case mix. Exhibit 9 examines a series of questions that lead toan appropriate decision of what type facility is the best fit.Exhibit 9. The Decisionmaking ProcessEnquiry No 7November/December 2006 • Orthopaedic Product News 15

INTELLECTUAL PROPERTY UPDATERecognizing Trademarks as aSource of Commercial Value,Part IIAuthor: John W. Boger, EsquireThis is a second of a two-part series on the nuts and bolts of trademarks.This second article will explain how one applies to register a trademark,the application process and what one can expect to occur during the“prosecution” phase of registration application, what is necessary tomaintain a trademark registration, and finally, the legal remediesavailable to a person in the event their registered trademark is infringed.The first step in filing a trademark application is to decide whether todo it online or by submitting a paper application. The United StatesPatent and Trademark Office (USPTO) has aggressively pushedapplicants to use the Trademark Electronic Application System or TEAS.The system is simple to use and provides the applicant with an immediatereply that lists the application serial number and submission summary. Incomparison, for mailed or hand-delivered paper applications, a personmust wait between two and three weeks to receive their filing receipt andassigned application serial number.The applicant must then determine whether to file an “intent-to-use”application or “use” application. To be able to file a “use” application,the applicant must have already started using the trademark incommerce. The use in commerce must be a bona fide use in the ordinarycourse of trade. “Commerce” has been defined as all commerce thatCongress may lawfully regulate (e.g. interstate commerce or commercebetween the U.S. and a foreign country).The second type of application, “intent-to-use,” is employed whenthe applicant is filing based upon their bona fide intent to use thetrademark in commerce. In other words, the mark has not been used yet,but the applicant fully intends to use it shortly. In order for the applicantto actually gain registration of the trademark using this type ofapplication, the trademark must, post-application filing, be used incommerce and then a separate form titled “Allegation of Use” must befiled evidencing the actual use of the trademark. This form must be filedeither on or before the date the trademark is approved for publication oron or after the date that the Notice of Allowance is issued by the USPTO.By filing an “intent-to-use” application, the applicant has six monthsfollowing receipt of the Notice of Allowance to actually use thetrademark in commerce. If the trademark is not used during this initialsix-month period, extensions of time in six-month increments can beapplied for. A maximum of three years of extensions are allowed. Afterthis maximum is reached, the USPTO will not register the trademark.Applicants need to be aware that for a trademark to ever actually beregistered, it has to be used in commerce.Eight elements must be included in the application before theUSPTO will accept it for review. These elements are:1. Name of the Applicant - The name of the trademark owner must beprovided. The owner is either a person or legal entity that controlsthe quality and nature of goods identified by the trademark.2. Name and Address for Correspondence - The name and addresswhere you will want correspondence sent by the USPTO.3. Depiction of the Trademark - A clear drawing of the mark that theapplicant wants registered must be provided. The drawing is used forthe search records, in the Official Gazette during the publicationphase and on the registration certificate. Depending on the type oftrademark submitted (e.g. words only vs. words and logo), a“standard character” drawing or a “stylized or special form” drawingmust be submitted.4. A Listing of the Goods or Services - A specific list of the goods orservices for which registration of the trademark is being sought mustbe included. Applicant needs to specify the goods and/or servicesusing clear and concise terms that the general public will understand.The International Schedule of Classes of Goods and Services that isavailable on the USPTO website should be reviewed and utilized inconjunction with a common commercial name and simple languageto identify the associated goods and/or services.5. Application Filing Fee - The fees will depend on the number ofclasses of goods and/or services that are elected for the trademark.The USPTO posts current fees on its website as these fees usuallychange in the fall of each year.6. Basis for Filing - As discussed previously, there are two categoriesfor filing: current “use” of the trademark in commerce, oralternatively, an “intent to use” the trademark in commerce at sometime in the future. Acceptable “use in commerce” includes having thetrademark appear on the goods, on the container or packaging for thegoods, or in the marketing/sales displays associated with the goods.The goods must then be sold or transported for commerce.7. Provide a Specimen - The applicant needs to provide an actualexample of how the trademark will be used in commerce or inconnection with the listed class of goods and/or services. A specimenfor a trademark shows the trademark on the actual goods or on thepackaging for the particular good. This may include a tag, label,container or sales display. Items that don’t qualify as a specimeninclude invoices or other billing information, brochures, order formsor letterheads.8. Signature - The person who signs the application must have properlegal authority to bind the applicant, or be a person with first handknowledge of the facts for filing the application. An attorney withwritten or verbal power of attorney or an implied power of attorneymay also sign.continued on page 1816 Orthopaedic Product News • January/February 2007

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INTELLECTUAL PROPERTY UPDATEcontinued from page 16The trademark application “prosecution” process includes severalphases. The first is the actual review of the application and trademark bythe USPTO that follows the initial clerical approval that the applicationincludes the above eight elements and assignment of a serial number.After this administrative phase is complete, the USPTO assigns anexamining attorney to perform the substantive examination of thetrademark. Depending upon the USPTO workload at the time of filing,the applicant may not hear anything regarding their submission from theUSPTO for upwards of six months.During the second phase, the examining attorney will perform acomprehensive search for conflicting marks, examine the writtenapplication, the drawing and any filed specimen. The search that isperformed is to determine whether there is a “likelihood of confusion”that exists between the applicant’s trademark and another mark that iseither registered or pending in the USPTO. The key factors consideredby the examining attorney when making the determination of theexistence of a “likelihood of confusion” are similarity of marks, and thecommercial relationship between the listed goods and/or services of thetwo marks (i.e., channels of commerce of the two marks). Conflicts areusually found when the marks are similar and the goods are related.The examining attorney will also evaluate the applicant’s trademarkto determine whether the mark is “merely descriptive,” deceptivelymisdescriptive, geographically descriptive, merely a surname orornamental. It should be noted that these are only a few of the manypossible grounds for refusal to register.In the event the examining attorney decides that the trademarkshould not be registered for any of the above reasons, an Office Action isissued providing the reasons for refusal. The applicant then has sixmonths from the mailing date of the Office Action to respond or theapplication will become abandoned. If in response to the Office Actionthe applicant is still unsuccessful in overcoming the USPTO’s objectives,a final refusal is issued. An applicant can appeal the final refusal, but thisis usually a costly endeavor.If the applicant is lucky, the examining attorney will raise noobjections to the application and the trademark will be approved forpublication in the Official Gazette. This third phase is called Publicationfor Opposition. What will occur is a Notice of Publication is issued bythe USPTO stating the date of publication of the proposed trademark.Any third party who believes that it may be damaged by registration ofapplicant’s trademark has thirty days from the publication date in whichto file an opposition to registering the mark. In the event no opposition israised or the opposition is not successful, the applicant’s application willproceed to the final phase of the registration process.The final phase will depend upon the type of application filed. If theapplication was based on prior “use” of the trademark, then a Certificateof Registration will be issued. If the application was based on an “intentto-use,”then a Notice of Allowance will issue giving the applicant a sixmonth time period to either file a Statement of Use or request a sixmonthextension of time to file a Statement of Use.All applicants need to be aware of a very subtle but extremelyimportant result of the registration process. When one files a trademarkapplication, the application is for registering a trademark on the PrincipalTrademark Register. Unfortunately, not all marks will reach the PricipalRegister. The USPTO maintains two registers, the Principal and theSupplemental. Registration on either register entitles the owner to use the® symbol with the mark. Registration on the Principal Register isreserved for marks found by the examining attorney to be distinctive.Benefits to being on the Principal Register include notice of ownership,conclusive evidence of the owner’s exclusive right to use the mark incommerce, the mark becomes incontestable after five years, and the rightto receive treble (or triple) damages. Marks registered on theSupplemental Register are usually those that have been determined to be“merely descriptive” by the examining attorney and have not achievedsecondary meaning or distinctiveness. Benefits to being registered on theSupplemental Register include having the ability to bring suit in Federalcourt, is a deterrent to others from using a similar mark, and the abilityto move the mark from Supplemental Register to Primary Register afterfive years of exclusive and continuing use that can be interpreted by theexamining attorney as a showing of distinctiveness when registration isapplied for a second time.Following the registration of the trademark, the new owner of themark must remember that the term of registration is only for ten yearsand that the registration must be renewed every ten years thereafter.What is even more important to remember is that between the fifth andsixth year of the initial ten year term, the owner must file an affidavit(e.g. Section 8 & 15 affidavit for the Principal Register, Section 8affidavit for the Supplemental Register) to confirm that the trademark isstill in use in order to maintain the registration. If the owner fails tosubmit the affidavit, the trademark registration will be canceled. Further,the owner must remember to renew the trademark registration every tenyears by filing a Section 9 affidavit. An owner may maintain theregistration of the trademark for an indefinite period of time as long asall the proper affidavits are filed in a timely fashion and the trademark iscontinually used in commerce.In order for an owner to maintain the value in his trademark, it isimperative that he monitor the marketplace and the Official Gazette tomake sure others are not using the trademark or are trying to register asimilar mark in an attempt to cause confusion for the consumer orcustomers. In addition, the owner of the trademark should be diligent informulating and publishing corporate policies (e.g. posting policies onthe company website) that dictate who may use the mark and how themark must be used. Taking these actions assists the owner in maintainingthe distinctiveness of the trademark and will hopefully keep thetrademark from becoming generic. It is very important to remember to bediligent in policing compliance by third party users of the trademark ofthese use policies in order to maintain the registered trademark as animportant corporate asset.By taking the above policing steps, an owner is actively guardinghimself against someone infringing his trademark. The resultant injurythat all owners of trademarks want to avoid is consumer or customerconfusion of the source of their goods because someone else is using thetrademark, and the resultant damage to the owner’s goodwill because ofthe consumer or customer confusion. The test of actual trademarkinfringement is whether another party’s use of the owner’s trademark islikely to cause a consumer to be confused about the source of the goodsor services. The simple question is, “Does the use of the mark create alikelihood of confusion?” If the answer is yes, then the other party hasinfringed the owner’s trademark.When making the decision as to the question of whether a likelihoodof confusion exists, courts look at numerous factors including similarityof appearance, similarity of marketing or sales channels and the level ofsophistication of the buyers of the goods. Defendants in trademarkinfringement lawsuits usually try to defend their actions by claiming fairuse of the mark, abandonment of the mark by the owner or that the markis invalid.Several remedies are available to the trademark owner that have beensuccessful after taking legal action for trademark infringement.Injunctions are commonly used to protect the winner of an infringementaction. Preliminary injunctions are sometimes granted if several factorsare met, including the possibility of irreparable harm to the owner.continued on page 2018 Orthopaedic Product News • January/February 2007

Enquiry No 9

INTELLECTUAL PROPERTY UPDATEcontinued from page 18Permanent injunctions are granted on a regular basis by courts ifinfringement has been found. Money damages may also be recovered bythe winner. Actual damage (e.g. lost sales and injury to reputation andgoodwill) may be recovered with the court having the ability to doubleor triple the amount, if the defendant acted willfully or in bad faith. Theowner’s lost profits may be recovered as well. The winner’s attorney feesmay also be awarded by the court in “exceptional cases.” Exceptionalcases are usually trademark infringement actions in which the defendanthas acted maliciously, fraudulently, deliberately or willfully.One last very important point that all trademark owners must keenlybe aware of is that an owner who fails to give notice of his mark beingregistered (e.g. by using ® or the words “Registered in the United StatePatent and Trademark Office” or similar abbreviation on the goodsand/or services) may NOT recover lost profits or damages. When suingan owner, a third party must demonstrate to the satisfaction of the courtthat the defendant in the infringement lawsuit had “actual notice” of theregistration.This two-part series is intended to give the reader a brief overviewabout trademarks, the registration process and the events that may occurpost-registration. Some suggestions have also been made that may behelpful in increasing an owner’s ability to gain more value from hiscurrent and future trademarks and steps to take to protect these importantcorporate assets. Please note that these two articles should not be viewedas legal advice and have been written for informational purposes only.John W. Boger is an associate with the Albany, New York, law firm ofHeslin Rothenberg Farley & Mesiti P.C. and is a member with the firm’sMedical Products and Technology Practice Group. Before attending lawschool, Mr. Boger worked for eight years with a large orthopaedic devicemanufacturer in various positions, including as a Product DevelopmentEngineer. He can be reached at 518-452-5600 or at jwb@hrfmlaw.com.Enquiry No 39Enquiry No 1020 Orthopaedic Product News • January/February 2007

Enquiry No 11

FUTURETECHEmerging Orthopaedic Technologies & TreatmentsRecent FDAClearancesIssued October and November 2006ActivaScrew(BIORETEC)AperFix Femoral Implant with Inserter(CAYENNE MEDICAL)ProPatch Soft Tissue Repair Matrix(CRYOLIFE)Force Titanium Compression Screw(DARCO INTERNATIONAL)Anchron Plus Biodegradable AnchorPass 2 Spinal SystemHemi ToeOsteoboost-BMA Syringe(INION)(MEDICREA)(ORTHOPRO)(ORTHOS)Trihedron MTP Hemi GT; Carpal Fusion Plate(SMALL BONE INNOVATIONS)Osteopore TCPSalto Talaris Total AnkleMaxima Anterior Cervical Plate SystemAdjust-Rite Fixation Devices(SPINECRAFT)(TORNIER)(U&I)(VALPO ORTHOPEDIC)FDA 510(k) Releasable Database10/06 and 11/06The Office of Inspector General (OIG) confirmed that physician-owned devicemanufacturing/distribution firms and group purchasing agents are subject to OIG’s 1989Special Fraud Alert, and that safe harbor protection only applies to those firms generating nomore than 40% of revenue from investors (e.g. physicians).(Department of Health & Human Services, 10/6/06)A study of Medicare data from 2002-2003 revealed that U.S. spinal surgery rates were ~8 timeshigher in some regions than others, although the percentage of back problem sufferers didnot differ much between regions. Medicare on average paid $16,842/patient for spinal fusion in2005, and the amount spent by Medicare on fusion surgeries has risen 500% over 10 years,representing ~1/2 of the $1 billion that Medicare spends on all spine surgeries.(USA Today, 10/17/06)Study results suggest that use of implanted hardware in spinal fusion to treat lumbar pain maynot improve outcomes. At 2 years post-op, of 1,950 patients who had been divided into fourgroups (receiving cages, other devices such as rods/screws, cages plus other devices or noimplants), ~60% in each group remained disabled. Those patients who received implants had twicethe risk of post-surgical complications.(Los Angeles Times, 11/1/06)A team of engineers has identified key physical processes that lend spider silk its strength anddurability. If replicated, manufactured spider silk could have application in the creation of artificialtendons and ligaments, sutures, etc.(ScienceDaily, 11/1/06)The Centers for Medicare and Medicaid Services (CMS) approved a pass-through payment foruse when St. Francis Medical’s X STOP ® Interspinous Process Decompression System isimplanted in a hospital outpatient setting. The new code, C1821, is effective 1/1/07. Non-devicerelated costs will be reimbursed under APC 0050, at $1,455.67 per treated level.(St. Francis Medical Technologies, Inc., 11/7/06; CMS-1506-FC (pp. 366-369), CMS.gov, 11/8/06)The 1st patient has received an investigational artificial knee that can wirelessly report digital,3-dimensional torque and force data to computers. The device uses wireless measurementtechnology from MicroStrain to provide information about twisting, bending, shearing loads, etc.that will help support new designs and implantation techniques.(MicroStrain, Inc., 11/9/06)The PROCON trial will assess the clinical outcome, development of adjacent disc disease and costs ofcervical anterior discectomy without fusion, with fusion using a stand alone cage and implantationof a Bryan disc prosthesis. (The name “PROCON” refers to the pros and cons present for each form oftreatment.) The study will enroll patients with a single level cervical disease without myelopathic signs. Eachtreatment arm will require 90 patients, to be followed for a minimum of 5 years. Study results will contributeto the discussion of whether additional fusion or arthroplasty is necessary and cost effective.(BMC Musculoskeletal Disorders 2006, 11/10/06)CMS is reviewing its National Coverage Decision regarding lumbar disc replacement, specificallyaddressing evidence on Synthes’ ProDisc and any other lumbar disc that receives FDA clearanceduring this national coverage analysis process. This process excludes DePuy’s Charité device. Aproposed decision memo is due on 5/28/07, and analysis is expected to be complete on 8/26/07.(NCA Tracking Sheet for Lumbar Artificial Disc Replacement, CAG-00292R, CMS.gov, 11/28/06;Reuters, 11/29/06)22 Orthopaedic Product News • January/February 2007

ORTHOINVESTOR UPDATETicker Track (Based on close of business, 9/30/06)Ticker 52-Wk 52-Wk Chg vs. Chg vs.Company Symbol High Low Close Prior Mo. Prior Yr.aap † AAQ 3.94 2.33 3.33 -6.7% 51.4%Alphatec Holdings ATEC 8.80 2.77 4.03 17.2% N/AArthroCare ARTC 49.15 38.34 41.67 3.1% 8.9%Biomet BMET 39.45 30.22 37.79 -0.1% 6.0%BioMimetic Therapeutics BMTI 15.40 6.20 10.60 -20.5% N/Aco.don AG † CNW 5.14 2.86 3.48 12.6% 8.7%ConMed CNMD 24.57 17.88 22.13 -0.3 -2.1%Corin Group †† CRG.L 6.69 3.84 5.14 3.8% -11.5%curasan † CUR 4.17 2.02 2.38 2.6% -22.2%Cytori Therapeutics † XMPA 9.67 4.21 4.41 5.5% -45.8%DJO Incorporated DJO 45.50 26.69 42.52 5.9% 36.1%Exactech EXAC 14.97 11.00 13.99 3.5% 8.3%Hanger Ortho Group HGR 8.95 5.45 7.00 -9.9% 10.6%Inion †† IIN 1.71 0.37 0.49 14.0% -67.3%IsoTis OrthoBiologics ‡ ISON 1.86 1.20 1.23 -8.9% -10.2%Kyphon KYPH 44.15 29.95 33.78 -14.5% -20.6%Langer GAIT 5.30 3.02 4.32 -6.7% -16.1%Millenium Biologix ‡‡ MBC 0.47 0.00 0.01 0.0% -96.0%NuVasive NUVA 24.40 15.14 23.00 -2.2% 34.1%Orthofix OFIX 48.48 35.00 43.49 -2.4% 18.6%OrthoLogic OLGC 6.20 1.25 1.36 3.8% -67.2%ORTHOsoft ‡‡ OSH 0.73 0.26 0.63 10.5% 80.0%Orthovita VITA 5.05 3.16 3.33 -9.8% -4.3%Osteotech OSTE 6.04 3.34 5.63 7.9% 57.7%ReGen Biologics RGBI 1.03 0.23 0.34 13.3% -59.5%Regeneration Technologies RTIX 8.29 4.87 5.97 -6.3% -27.1%Smith & Nephew SNN 51.00 36.70 47.57 -2.5% 6.8%Stryker SYK 54.35 39.77 51.86 -0.8% 19.6%Symmetry Medical SMA 22.95 10.82 13.59 -12.7% -25.8%Synthes ‡ SYST 135.32 107.56 118.20 4.8% 10.2%Wright Medical Group WMGI 25.09 18.54 23.93 -3.2% 23.5%Zimmer Holdings ZMH 75.36 52.20 72.96 1.4% 16.5%†Converted from Euro to USD; 1€ = 1.3344 USD.††Converted from British Pound to USD; 1£ = 1. 9699 USD.‡Converted from Swiss Franc to USD, 1CHF = 0. 8398 USD.‡‡Converted from Canadian to USD; 1CDN = 0. 8707 USD.In order for a company to qualify for inclusion in the OrthoInvestor Update, orthopaedics must representat least 60% of its revenues.Company Financials †3Q06 vs 3Q05Company Sales vs.($MM) PriorAlphatec $17.4 +51%Exactech $24.3 +13%Knees $12.0 +9%Hips $4.5 +22%Biologics Services $3.4 +15%Other $4.4 +12%Isotis $10.2 +25%U.S. $6.0 +19%International $2.4 +44%Kyphon $102.7 +30%U.S. $82.5 +23%International $20.2 +66%NuVasive $25.2 +65%Orthofix $77.2 +10%Spine $29.3 +15%Reconstruction $32.1 +7%Trauma $15.8 +5%Smith & Nephew $505.0 +14%Reconstruction $219.0 +13%Trauma $125.0 +15%Endoscopy $161.0 +13%Stryker $1,294.0 +10%Ortho Implants $741.6 +9%MedSurg $489.5 +13%Physical Therapy $62.9 -5%Synthes $595.1 +15%North America $382.6 +14%Europe $126.4 +16%Asia Pacific $50.3 +6%Rest of World $35.8 +28%Wright Medical $78.6 +6%Knees $21.8 +2%Hips $27.6 +15%Extremities $10.8 +10%Biologics $15.8 +6%Other $2.5 -16%Zimmer $820.0 +7%Recon $676.0 +7%Trauma $49.0 +9%Spine $42.0 +10%Ortho Surgical $53.0 -4%†Orthopaedic product sales only.Company news releases10/06 and 11/06January/February 2007 • Orthopaedic Product News 23

A Look Back at 2006FISCAL FITNESSAuthor: Shirley A. EngelhardtWhen I started writing this article, I thought…2006 was kind of boring.No big mergers, no big product recalls, no one went to jail. Then I peeledback the onion and, well, it was actually kind of an exciting year.The CEO of the seventh largest orthopaedic company in the world(Biomet) walked out and, within nine months, an offer was made for purchaseof the company. An influx of newcomers appeared before FDA,while an influx of money financed many a start-up or strategic alliance.Companies bought and sold assets, began oodles of clinical trials, suedeach other over intellectual property (IP) and answered inquiries fromthe Federal Government.We witnessed the launch of product initiatives based on gender andage and watched as a number of European and Asian companies establishedU.S. branches. If nothing else, 2006 reaffirmed for us the stabilityand strength of orthopaedics in the worldwide medical device industry.Here’s a brief review of the year.$500 Million Towards the FutureThis past year saw the infusion of more than $500 million into theorthopaedic space, about one-third in initial public offerings (IPOs) forspine and orthobiologic entities. The remaining grant, venture and privateequity monies will go towards development of such diverse technologiesas hydrophilic polymers for joint resurfacing applications andbone cutting instruments, as described in Exhibit 1.Busiest this past year in merger and acquisition (M&A) activities,however, was Kyphon. The company bought InnoSpine and the licenseto a bone tamp, and agreed to acquire St. Francis (for $525 million incash + up to $200 million more) and the spine-related assets of Disc-O-Tech (for up to $240 million). These latter two acquisitions would serveto minimize Kyphon’s vulnerability as a one-technology (e.g. kyphoplasty)company, giving it immediate access to markets for spinal stenosisand degenerative disc disease and bone cement and cement deliverytechnologies.Aside from the aforementioned strategic buys in orthopaedics, financialbuys appeared front and center. For example, an investment groupled by Warburg Pincus acquired a majority interest in Tornier, whileEncore found itself a private company at year’s end following its mergerwith Blackstone Capital Partners. Blackstone also played a role in theyear’s most awaited announcement – the $10.9 billion acquisition ofBiomet by a private equity consortium (which includes affiliates ofBlackstone and others). That acquisition is expected to close by October2007. Some speculate that this private investment group may also bid onSmith & Nephew, which had been a bidder for Biomet.Beyond M&A activities, strategic alliances for 2006 centered most ondistribution/development of orthobiologics, as exemplified byOrthoLogic and Quintiles, Altiva and Curasan, TiGenix and HSS, etc.etc. etc. For Regeneration Technologies (RTI), however, orthobiologicalliances (with Exactech and Medtronic Sofamor Danek) were altered togive RTI more leverage in using other partners for distribution of its allograftand xenograft products.Outside of orthobiologics, deals were consummated in the areas ofpower instruments (Zimmer/Brasseler), fracture repair (IntelligentOrthopaedics/BSN), joint replacement (Portland/PLUS, Corin/Stryker),pain management (VQ OrthoCare/CoolSystems), coatings(Affinergy/Synthes and MTF, Biorthex/Johnson & Johnson subsidiary)and inventory/distribution/billing logistics (Summit Corporate andOrthos and Accin). At least one deal came to an end – that betweenOrthofix and Medtronic granting the latter rights to market the former’sbone growth stimulation products.Exhibit 2 lists deals made in the orthopaedic space in 2006.p.s. Tutogen turned down Zimmer’s proposal of purchase and a mergerbetween Alphatec and Scient’x got shelved for the time being.Building Mega-Franchises à la Össur and KyphonAs dollars and euros financed many a dream of a better mousetrap,money also found its way into the coffers of well-established entities thatbecame targets for takeover. For instance, Össur solidified its existingorthotics and pain management franchise (which includes Generation IIand Royce) with the acquisition of Innovation Sports. DJO outdid itsIcelandic competitor with the purchase of a market leader, $100 millionAircast, and smaller bracing and soft goods company, Nexmed.Moog purchased McKinley’s pain management business, Corin acquireda 7.5 percent stake in Acrobot and OsteoMed acquired Skeletal Kinetics,which was the source for its OsteoVation bone graft substitute. aapImplantate and FAME Medical merged, bringing together complementarybone cement, bone graft substitute and tissue product lines predominantly inEurope, and Orthofix completed its $333 million acquisition of BlackstoneMedical. That deal squarely positions Orthofix as a contender in the spine Progress through FDA or Lack Thereofmarket, with a full line of instrumentation, biologics and stimulators.Based on the number of 510(k) clearances, clinical trials and otherDePuy picked off Hand Innovations and Future Medical Systems, regulatory-related activity, 2006 marked a busy year for FDA.expanding its presence in the fracture repair and fluid management segmentsof the market. Integra LifeSciences agreed to acquire Miltex and ucts/technologies in 2006 numbered more than 20 and hailed from suchCompanies with their first FDA clearances for orthopaedic-related prod-KMI, beefing up its positions in surgical instruments and small boneproducts, respectively. continued on page 2524 Orthopaedic Product News • January/February 2007

FISCAL FITNESScontinued from page 24Exhibit 1.Orthopaedic Companies and Funding Received in 2006Orthopaedic Companies and Funding Received in 2006Company ($MM) Expected Use of FundsAlphatec $83.7 IPO (ATEC on NASDAQ); spine and orthobiologic productsAmedica $16.8 Support product introductionsAnulex $20.0 Commercialize Inclose Surgical Mesh and other spine repair technologiesApaTech $3.6 Support sales and marketing, expand into spinal arenaArchus Orthopedics $35.0Develop future spine products in collaboration with DePuy Spine (J&JDevelopment investment)Arthro Kinetics $10.0 Expand into British market for regenerative joint replacement productsAxial Biotech $0.7 Further develop technologies for treatment of spine diseaseB1 $2.3 License to patents relating to joint replacement and diagnostic softwareBioDuct $1.4Preclinical research, product development, FDA submission for BioDuct kneerepair technologyBioMimetic Therapeutics $36.8 IPO (BMTI on NASDAQ); rhPDGF for orthopaedic applicationsBioSyntech $21.0 Complete clinical trials for lead products (orthobiologics)BlueBelt Technologies $0.1Further develop and commercialize Precision Freehand Sculptor ("intelligent"bone cutting) technologyBoneSupport $17.0 Launch Cerament bone void filler, expand Spine Support studies, etc.Histogenics $13.1 Further develop in-vivo and ex-vivo cartilage formation technologiesHydrocision $12.7 Support microdiscectomy clinicals, expand sales and marketing, etc.iBalance $8.2 Develop Axial Knee Realignment SystemK2M $21.5 Expand sales, marketing and product developmentLDR $14.0 Support IDE for cervical and lumbar discsOrthoHelixseveralmillionOrthoMimetics $9.6Accelerate marketing efforts for products, complete development of additionalproducts, support the growth of the businessMove towards CE Mark approval of biological scaffold products for cartilage andligament repairOsiris $38.5 IPO (OSIR on NASDAQ); orthobiologicsParadigm Spine $14.0 Expand non-fusion technology platformRelievant Medsystems $5.1 Further develop devices for treatment of back painSonoma Orthopaedic Products $3.0 Further develop MIS products for long bone fracture repairSchwartz Biomedical $2.0 Further develop BioPoly Resurfacing implantSmall Bone Innovations $42.2 Further develop existing products linesSpinalMotion $20.0Continue enrollment in lumbar and cervical disc clinicals; develop posteriorlumbar discSpine Wave $36.5 Launch and clinical support for StaXx XDTiGenix $19.3Launch ChondroCelect for cartilage repair in U.S. and Europe; productdevelopmentTotal Funding $508.0continued on page 26January/February 2007 • Orthopaedic Product News 25

FISCAL FITNESScontinued from page 25diverse places as South Korea and Valparaiso, Indiana. Exhibit 3 liststhese companies along with their newly-cleared products.Having traveled the more arduous IDE/PMA route to product clearancein the U.S., Synthes received FDA’s okay to market its ProDisc-Llumbar disc, while FDA’s Orthopedic and Rehabilitation Devices Panelrecommended for approval of Medtronic’s Prestige cervical disc andInfuse for craniomaxillofacial indications. Smith & Nephew’sBirmingham Hip Resurfacing System also received FDA clearance, asdid Aastrom Biosciences’ proprietary Tissue Repair Cells for use in treatmentof osteonecrosis, cleared through an Orphan Drug Designation. AnFDA panel will meet in first quarter 2007 to review Corin’s Cormetresurfacing hip for possible clearance in the U.S.ReGen Biologics failed in its attempts to gain FDA clearance for itscollagen scaffold and FDA cancelled a meeting in 2006 that may delayclearance for Stryker’s OP-1 putty. Millenium Biologix withdrew itsrequest for an IDE for Peptos bone graft product and OrthoLogic’s IDEfor Chrysalin was terminated due to lack of demonstrable benefits of theproduct in treatment of distal radius fractures.FDA’s Orthopaedic and Rehabilitation Devices Panel voted to opposereclassification (downclassification) of non-invasive bone growth stimulatorsand classified BioniCare’s pulsed electrical stimulator technologyas “Transcutaneous Electrical Stimulator for Arthritis,” as opposed to aExhibit 2.Strategic Alliances in Orthopaedics in 2006Company Providing Company Receiving Activityaap FAME MergerAastrom Biosciences Orthovita Agreement to develop orthopaedic products using Orthovita's Vitoss scaffolds + Aastrom's Tissue Repair CellsAffinergy Synthes Exclusive development/license agreement for coatings/medical devices in spinal, trauma and craniomaxillofacial areasAffinergy MTF Exclusive worldwide alliance for use of Affinergy's coating technology with MTF allograft productsAlloSource Osiris Provision of bone matrix for production of Osiris' bone regenerating productsAltiva Curasan Launch of Cerasorb M Ortho beta-tricalcium phosphate product for spinal indicationsArtimplant Arthrotek Distribution/launch in U.S. of Sportmesh rotator cuff patchBiorthexNitinol Device & Components (J&Jsubsidiary)Collaboration to develop Actipore-based (porous Nitinol) surface coating for orthopaedic implantsBlackstone Capital Encore Medical Merger (return to private status)Blackstone et al . private equity Biomet Acquisition (to close 10/07)Brasseler Zimmer U.S. distribution of Brasseler's large bone surgical power equipment system and other devicesCeraPedics BioD Collaborate on product development using CeraPedics' P-15 bone graft substitute technology and BioD's stem cell procurement procedureClearant Tissue Banks International Supply of Clearant Process sports medicine implantsCoolSystems VQ OrthoCare Distribution of Game Ready Accelerated Recovery System to podiatrists, pain management specialists and orthopaedic and spine surgeonsCorin Stryker Exclusive U.S. marketing/distribution of Corin's Uniglide mobile bearing unicondylar knee systemCorin Acrobot Acquisition of 7.5% stakeDePuy FMS, Hand Innovations AcquisitionEncelle Pioneer Surgical Technology Collaboration on product development (e.g. for bone graft extender in spine)Integra KMI, Miltex AcquisitionIntegra LifeSciences Miltex AcquisitionIntegra LifeSciences Kinetikos Medical AcquisitionIntelligent Orthopaedics BSN Medical Global rights to distribute STORM device (Staffordshire Orthopaedic Reduction Machine) for fracture reduction in tibia and distal femurIsoTis OrthoBiologics Alphatec Non-exclusive private label agreement for distribution of DynaGraft II DBMKyphon Disc-O-Tech, InnoSpine, St. Francis AcquisitionLifeNet Zimmer Rights and licenses to patents and intellectual property related to Allowash bone cleaning and sterilization technologyMedArtis Vertebron Worldwide distribution (U.S. exclusivity) of tricalcium phosphate and hydroxyapatite synthetic bone graft materialsMoog McKinley Acquisition of pain management businessOrthofix Blackstone AcquisitionOrthoLogic Quintiles Development/commercialization of synthetic peptide with potential application in fracture repairOssur Innovation Sports AcquisitionOsteobiologics Alphatec Exclusive U.S. marketing/distribution rights to PolyGraft for certain spine bone void filling applicationsOsteoMed Skeletal Kinetics AcquisitionOsteotech Bacterin Nonexclusive license to U.S. Patents. 5,284,655 and 5,290,558 relating to flowable DBM powder compositionsPortland Orthopaedics PLUS Orthopedics U.S. distribution of Portland's Revision Knee SystemRegeneration Technologies (RTI) Altiva Distribution of OsteoBridge line of DBM-based productsRegeneration Technologies (RTI) Pioneer Distribution of BioSet DBM pasteRTI Blackstone Manufacturing of BioCleanse-Sterilized Spinal AllograftsRTI Cryolife Exchange and service agreement for orthopaedic tissueSmith & Nephew Endoscopy Nexa Orthopedics Exclusive right to distribute certain PolyGraft products for forefoot surgerySummit Corporate Services Orthos Product importation, management of Orthos' distribution facility, inventory, billing, etc.Summit Corporate Services Accin Product support, inventory management, logistics, distribution, etc.TiGenix Hospital for Special Surgery Collaboration for further development of ChondroCelect cartilage repair productTranS1 ApaTech Exclusive U.K. and Ireland distribution of AxiaLIF lumbar fusion systemTutogen RTI Mutual sourcing agreements; RTI w/ 1st right of refusal to all soft tissue used in sports medicine surgeries recovered by Tutogen's partnersWarburg Pincus et al . Tornier Acquisition of majority interestcontinued on page 2726 Orthopaedic Product News • January/February 2007

FISCAL FITNESScontinued from page 26Exhibit 3.Newcomers to FDA 510(K) Clearances in 2006Accin Uni-Knee System (Accin)Acute Bone Screw (Acute Innovations)ActivaScrew and ActivaPin (Bioretec)Endoscopic Spine System (Arthro Kinetics)Pin Screw (BK Meditech)AperFix Femoral Implant with Inserter (Cayenne Medical)DSI Pins and Wires (Delta Surgical Instruments)Space CPSXL Bone Cement (DFine)Eberle Shaver System C2 and Shaver Blades (EberleFeinwerktechnische Systeme)Gss Pedicle Screw System (Gs Medical)STORM Operating Kit (Intelligent Orthopaedics)Cement Restrictor (Interbody Innovations)IFS Cannulated Bone Screw (Internal Fixation Systems)KFx Knotless Fixation System (KFx Medical)Koby Surgical Internal Fixation System (Koby Surgical)Distal Radius Locking Plating System (Newclip Technics)Hemi Toe (OrthoPro)Osteopore PCL Scaffold (Osteopore)Osteo-Link Bone Void Filler Pellets (Promed Advance Technology)Shaver Blades (Rema Medisintechnik)Mykres Spinal System (Showa Ika)SSP Pedicle Screw System (Specialty Spine Products)Atlas Spinal Cage, multiple models (Spinal Edge)Slimplicity Anterior Cervical Plate System and Spinal USACement Restrictor (Spinal USA)Osteopore TCP (Spinecraft)Adjust-Rite Fixation Devices (Valpo Orthopedic)TENS device. We’re still waiting for some disposition on a downclassificationof mobile bearing knees.The year brought the first implantation of xenograft (bovine) boneproducts in humans in the U.S. through RTI. Anika and Integra beganhuman clinicals for their anti-adhesion products for use after spine surgery(in the U.K. and U.S., respectively). Human clinicals began in 2006(most in the U.S.) for an all-polymer hip (Active Implants in Europe),GEM OS1 Bone Graft in foot/ankle fusion and unstable distal radiusfracture repair (BioMimetic Therapeutics), P-15 Putty (CeraPedics),Cartilage Autograft Implantation System (DePuy Mitek), cervical disc(DePuy Spine), Bidex spinal implant (Expandis in Israel), AnatomicFacet Replacement System (Facet Solutions), TOPS posterior motionpreservation system (Impliant), Mobi-C cervical artificial disc (LDR),DIAM posterior dynamic stabilization product (Medtronic), NFlexPosterior Dynamic Stabilization System (N Spine), NeoDisc cervicaldisc replacement device (NuVasive), coflex dynamic interspinousimplant (Paradigm Spine), PEEK-on-PEEK-based NUBAC IntradiscalArthroplasty System (Pioneer Surgical), Collagen Meniscus Implant forlateral meniscus injury (ReGen Biologics), NuCore Injectable Nucleus(Spine Wave) and Dynesys with hydroxyapatite-coated screws (Zimmerin Europe). ApaTech also launched a multicenter international study tocompare its Actifuse Synthetic Bone Graft with Medtronic’s Infuse ininstrumented posterolateral lumbar spinal fusion.Berne vs. Synthes; Biedermann Motech and DePuy Spine vs. a numberof companies (e.g. Acme Spine, Allez Spine, Alphatec, etc.); andMedtronic vs. Biomet, Blackstone Medical, EBI Spine, Globus Medicaland Kyphon. Many of the Medtronic suits relate to protecting IP the companypurchased from Gary K. Michelson, M.D.The year also brought more than one visit from the U.S. Departmentof Justice (DoJ). In mid-2006, Biomet, DePuy, Smith & Nephew, Strykerand Zimmer received subpoenas from the U.S. DoJ requesting documents(from 2001 to mid-2006) relating to possible violations of U.S.antitrust laws, as regard the manufacture and sale of orthopaedicimplants. DePuy also noted that search warrants had been executed inconnection with the investigation. The DoJ also dismissed two qui tamsuits pending against Medtronic relating to allegations of sales and marketingpractices in its spinal business. Resolution of the case included a$40 million civil settlement placed in escrow.The Federal Bureau of Investigation (FBI) and FDA also found themselvesin our world. FDA filed a complaint against Endotec for unapproveddistribution of certain medical devices and FBI arrested a neurosurgeon,charging him with taking kickbacks for medical equipment purchasedby Medicare and Medicaid. The surgeon was freed on $4.3 millionbond, ordered to wear an ankle bracelet and confined to his home. Ofnote, an FBI witness against the surgeon died mysteriously. The caseshould go to trial in 2007.Finally, in a serious lapse of judgment or perhaps in an attempt to wina Darwin Award, some knucklehead who used to distribute products foran orthopaedic company actually emailed his competitors to try to getthem to coordinate with him on implant pricing at one hospital. He didn’tget any takers.We ended the year with renewed optimism about orthopaedics fromWall Street and the investment community. Stocks appear to be on therebound and growth likely will be more robust than many of us predicted.Some research results from 2006 offer glimmers of hope, as well.Genetically engineered, muscle-derived stem cells helped in articularcartilage defect repair, cord blood stem cells could be used to create bonestructures for fracture and defect repair and enriching collagen gel withplatelets may help in soft tissue repair. We learned that too much fluoridemay be causing problems in the bone and teeth of Americans, that thestructures of ice and mollusk shells may serve as templates for developmentof stronger materials and that manufactured spider silk could haveapplication in the creation of artificial tendons and ligaments.Anti-smoking campaigns moved into the operating room, with somesurgeons suggesting that smokers either quit or forget about that new hip.Similar dicta have been proposed for those who are obese. Good news,though - pine tree bark extract once again showed that it can decreasepain and inflammation associated with osteoarthritis of the knee.I take solace in that fact. One day I will probably face the prospect ofOA and, when that day comes, if I am smoking or obese or an otherwiseat-risk patient, I will steer clear of the hospital and simply tap into one ofthe hundreds of thousands of loblolly pines that live with me in upstateSouth Carolina.Here’s to 2007. May you find yourself surrounded by your ownloblollies, whatever they may be.Shirley A. Engelhardt is President and Founder of KnowledgeEnterprises, Inc. a stategic services firm solely focused in orthopaedics.She can be reached at 440-247-9051 or shirley@orthoworld.com.IP Battles and Lack of IntellectThe typical spate of lawsuits continued throughout 2006 mostly in thearea of spine: Kyphon vs. Medtronic Sofamor Danek; University ofEnquiry No 40The author owns a small stake in all publicly traded orthopaedic companies as wellas several private ones.January/February 2007 • Orthopaedic Product News 27

INTELLECTUAL PROPERTY UPDATECommercializing Your Invention:Perspectives from Both Sides ofthe TablePart 2: The Art of the DealAuthor: John A. EngelhardtThe first part of this article discussed early steps in the process ofgenerating a revenue stream from your invention, and focused onsecuring ownership and safeguarding your intellectual property assets(“Avoiding Pitfalls Early in the Process,” November/December 2006).You have begun the process of securing patent rights and have moved tothe production of prototypes and reduction of the invention to practice.Anyone who has been through the process knows full well that by now,you have spent way over your imagined budget in dollars, blood, sweat,tears and frustration. Yet the expenses keep on coming. Will your dreambecome a nightmare money pit or a significant source of revenue? In thisinstallment, we’ll delineate the next crucial steps in hopes that the roadto revenue will rise to meet you, rather than drop you off the side of acliff.First, You Will Need More MoneyGenerally, financing in the earliest stages comes in the followingorder:YouFriendsFamilyAngelsVenture CapitalIt is easy to see how and why this is the case. The easiest money toget is your own. You have faith in yourself. You trust your judgment. Yousee little risk with yourself at the helm. It stands to reason that friends andfamily will feel similarly. Many times, all these folks need to make aninvestment is your word that you will succeed. That, and a good healthydose of greed can serve as motivation enough to cash in that CD and joinyour team. Herein lies a potential problem. By taking on an investor,you assume potential liability.Even though you may have thoroughly explained the risks involvedand executed the necessary legal documents, any shareholder, regardlessof who it is, can claim that you have not acted in his or her best interestsand can make life Hell for you. This can become as extreme as a lawsuitor as benign as ten phone calls a day requesting an update. Before takingon any investors, ask yourself this simple question: Do I really want mymother-in-law to own a portion of my business, of my dream?Your obligations to investors consume resources that you may nothave imagined. Many states require full and regular financial disclosureto all investors, no matter how small.Not All Money is Created EqualYou will hear professional business people use the term “smartmoney.” Try to be sure that every potential investor brings, in addition tocapital, some knowledge, experience or expertise that will help yourbusiness move forward. This is why oftimes early investors areclinicians, bankers, business executives or attorneys. Your golf partnermay be drooling about investing in your enterprise, but you need to askyourself how much his money is worth compared to that of other,“smarter” money.The only way that you can maintain complete control of yourassets is to own them all yourself. Once you take on investmentcapital, you begin the process of losing complete control.It is very simple. If you want to maintain total control, you have fewchoices but to finance it yourself.It stands to reason that as you step outside of friends and colleaguesand family, a higher burden is on you in securing financing. Themotivations of those who don’t know you, or even care much about you,are financial, not emotional. The money is harder to get and moreexpensive. The world of professional investors, the domain of the reallysmart money, can be a cold and very calculated one. You need a plan.(For a much more detailed and erudite discussion of start-up fundingread Gary Stevenson’s article, “Funding the Start-Up: Is All Money theSame?” in the November /December 2005 issue of this publication.)The Business PlanThe Internet is chock full of business plan software. No professionalinvestor will consider putting money into something without someformal plan. The plan delineates the business process and describes whatyou are building, how you will use invested capital, and mostimportantly, what the return to investors will be and in what timeframe.In professional investing, how much and when are key.I read a number of business plans written by surgeons who have notsought the expertise of a business person. Not surprisingly, they read likea clinical publication, with carefully referenced citations. One hundredpages are devoted to the clinical aspects of the technology and maybeone or two about the “business.” The management team consists ofM.D.s and Ph.D.s and maybe an engineer thrown in. And of course, thekey surgeon inventor is the CEO! Give this some serious thought.continued on page 3028 Orthopaedic Product News • January/February 2007

Enquiry No 12

INTELLECTUAL PROPERTY UPDATEcontinued from page 28Certainly there are successful surgeon businessmen, but the key to asuccessful endeavor in business as in sports is to secure the best, mosthighly talented individuals in their respective places. A successful CEOcannot be declared any more than a successful surgeon can. Rememberwhat happened when Michael Jordan made the move to professionalbaseball? Would you bet a plugged nickel on Mike Tyson in a new careeras an ice dancer?Your odds of getting cash from the professionals increaseconsiderably if the above is taken into account. Seek out those with therequired expertise, incorporate their wisdom and accept their assistance.Another thing we often see in business plans is that the inventor hasnone of his own money involved. It is hard for an investor to take a riskthat the developer is not prepared to take. Remember that the easiestthing for a potential investor to do is walk away.What Do You Want to Be?We have discussed all of the above without your having decided thepath you will take to commercialization. Regardless of what you decide,we recommend that you go through the process of writing a formalbusiness plan, and remember that any way you choose will require moremoney than you have budgeted.Although many variations present themselves, two basic paths to arevenue stream can be considered:1. License your assets to an entity that will commercialize them.2. Build your own commercial entity to take the products to market.We have addressed the details of the second option, and will continueto do so in the future, so let’s take a closer look at the first option, as thisis the form that most transactions will take.Basically, you are offering your assets to a commercial entity that willmake, market and sell “inventions” that you own. Although a license cantake multiple forms, many have a generic format that consists of threeelements.You would like your invention to be pursued as aggressively aspossible. The ideal entity to do that may not be the one whose productsyou currently use, based simply upon market dynamics. Find an advisorwho understands your technology in the strategic context of the market,in order to identify the entity that will see the most value in it. This iswhy the largest company in the space may not be the optimal partner. Ifyour house were for sale, you would never consider showing it to justone prospective buyer unless you were absolutely convinced that he wasthe highest-value purchaser.All industry transaction teams of which I have been a part have actedwith the utmost integrity. What is sometimes perceived as untowardbehavior is simply bureaucracy, or in the worst cases, incompetence. Inmany situations in which the inventor becomes unhappy, it is due to amismatch in the value perception from each side of the table, and anaïveté on the part of the inventor regarding responsible businessopportunity analyses.The process will be extremely frustrating and time consuming foryou, regardless of how you go about it. Many inventors berate companiesfor being slow to act, seemingly ruthless about terms of a transaction andbogged down in red tape. Most companies have very strict criteria foraccepting new product projects, and well they should. A fairly detailedseries of market and financial analyses will be done in order for them todecide if your opportunity makes good business sense. This takessignificant time, effort and expense on their part. If this is not done,beware. They probably want something different than what you areoffering.Beware the LoveAny surgeon who has approached a competitive company knows thewarm glow of love literally heaped upon him. Companies live to takebusiness from their competitors. It is part of what makes capitalism workso well. No wonder everyone laughs at your jokes and holds the door foryou and gets you a bottled water when you’re thirsty. If you comebearing an idea for sale, maintain a level of detachment and ask yourselfthree questions.1. An upfront payment2. Milestone payments and/or royalties3. Consulting agreement or continuing assistance1. How many surgeries do I do every year?2. How much influence do I have in the surgeon community?3. How old am I?Here’s where it gets interesting. To make the psychic impact lesspainful, get used to the fact that what you are offering is worth less in the“buyer’s” mind than your own.Since an upfront payment is essentially a purchase of rights, youwould like it to be as large as possible. Thus it is critical that you decidethe optimal point in the life of the technology to license it. Question:How far do you take it? Answer: As far along the value continuum as youcan afford to. The further you move toward commercialization, the morerisk you have removed for a buyer and the more it should be worth tothem. A common mistake we see is moving to license too early, beforereal value is realized, or too late—usually when the inventor is sostrapped for cash that any offer looks good. We recommend, asminimum, after the first office action on a patent is received.Finding the Right PartnerMost surgeons will naturally approach the company whose productshe uses, and many times through the sales rep with which he already hasa relationship. The reasons for this are obvious, but perhaps a more“clinical” approach is optimal.Sounds kooky at first, but it’s just good business.The more you do, the bigger a fish to take from the competition. Themore influence you have, the better the odds of leveraging your businessin the market at large. And finally, the younger you are, the longer it alllasts. A company’s decision to take on your project may be morepredicated on marketing than business development. Find out what theprimary motivations are.Before you begin discussions, do some homework. Get a third partyvaluation of your transaction. Get someone to negotiate with the targetcompany on your behalf—for a number of reasons. It is important toremove the emotional component from the business transaction as muchas possible. Emotional decisions are usually poor business decisions. Inaddition, the negotiation process can get heated. Let someone else takethe heat. You will need to be a friendly partner with the people at thecompany in order to work together to optimize the asset.Who should you get to negotiate? Like everything else, someonequalified in both the legal and strategic spaces unique to orthopaedics.continued on page 3130 Orthopaedic Product News • January/February 2007

INTELLECTUAL PROPERTY UPDATEcontinued from page 30Don’t use your accountant or your general family lawyer. (Myopinion.)The licensing process will take longer than you imagine. Be preparedto be involved for a year from the time you approach the target until anagreement is signed. Make sure you have the financing to survive theprocess, and remind yourself to factor in the time away from yourpractice that the process will require.The Legend of the “Hosin’ at the Closin’ ”You have spent months negotiating all the details of a multifacetedlicensing agreement. All that is left is to sign the documents and have thechampagne toast. The deal is done in your mind. You have the transactionfees allocated and your future has become clear. Your mind is in posttransactionmode. You and your attorney travel perhaps hundreds ofmiles to sign the documents and shake the hands. Maybe the buyerbrought a gift of expensive pens, finely engraved with the name of thedeal. When you review the documents, the terms have changed. That $5million upfront payment has morphed into milestones over three years.You react with shock and dismay. You have just experienced the “hosin’at the closin’.”While the above has been dramatized for effect and would onlyhappen as stated with the most unscrupulous of buyers, variations of ithappen all the time, and some quite benignly and with no malice meant.If this should ever occur, there is only one reasonable option. Walk away.Leave. Go home. Exercise your right to thoughtful deliberation at yourown pace, and return to discussions with a cool head.A key point to remember is that the value of a deal to all parties is bestmeasured after the agreements are signed. A good advisor will be sure toinclude as part of any agreement an avenue for you to retain your rightsin the event that a purchaser’s priorities change. One wise businessbroker is fond of saying, “A deal is not over until it’s over, and then it’sstill not over.”This article is meant to illustrate some high-altitude key issues in theprocess of deriving a revenue stream from your ideas. It has notaddressed the myriad details that accompany the process, and is in noway a substitute for the sound advice and counsel of pedigreedprofessionals. The best protection for you is to seek out colleagues whohave been there and done it.While the process of commercializing your inventions is sometimestedious, nearly always frustrating and many times downright painful, thepayback can be enormous from both a psychic and (hopefully) financialstandpoint. It is perhaps motivating to know that more than 20 millionorthopaedic procedures were performed last year. Nearly all of themutilized technology at least partially developed by surgeons. The fact isthat the delivery of medical care in a capitalist environment dictates thatunless a development is of commercial benefit, it will likely neverbenefit mankind. Without your contributions, innovation is doomed.John A. Engelhardt is Chief Executive Officer of Knowledge EnterprisesInc., a strategic services firm solely focused in orthopaedics. He is alsoa Founder and Managing Member of Knowledge Ventures, LLC, an earlystage musculoskeletal investment fund. He holds 19 patents fororthopaedic technologies, and is a former executive of DePuy Inc. andAcroMed Corp. He can be reached at 440-247-9051 orjohn@orthoworld.com.Common Mistakes in the Innovation Process❍ Technology addresses too small a market❍ Moving too early or too late❍ Refusing to give up “control”❍ The big company myth❍ Underestimating the money, time and energy required❍ Failure to get qualified assistance until it’s too lateEnquiry No 41To see your productslisted within theProduct News andProduct Featuresectionsemail your information to usopn@orthoworld.comJanuary/February 2007 • Orthopaedic Product News 31

SURGEON AS ENTREPRENEURThe Truth AboutPhysician-Owned GPOsAuthor: John M. McGuire, M.A., C.P.A.As physicians continue to see dramatic reductions in reimbursements,increased demands on their time, hospital cost initiatives and growth inpatient and procedure volumes, they are invariably looking for ethical,legal and sustainable ancillary revenue sources. Models implemented inorder to provide such revenue sources to physicians have to date includedinformal and formal gainsharing arrangements, physician-owned grouppurchasing organizations (GPOs) and physician ownership of devicemanufacturers and distribution companies. Each of these has shownvarying degrees of success. In addition, surgeons in some communitiesare becoming more closely aligned with hospitals, especially when thehospital assumes some of the cost of the practice or otherwise providesservices to the physician practice, or partners with the practice so as tomore closely align the financial incentives of the physician and thehospital. These incentives often include joint ventures like surgerycenters, devoted operating rooms, back-office staff, administrativeservices and more.Under the physician-owned GPO model, physicians cooperativelyinvest in a local entity, evaluate competitive products and vendors,standardize implant selection, retain access to specialized technology andrealize a significant investment return based on the success of the GPOand on the reduction of implant costs in participating institutions.Properly constructed, this model preserves physician choice of productswhile allocating a portion of the financial impact of those decisions to theimplanting physician. This successfully aligns the incentives ofphysicians and hospitals, provides physicians with an ancillary revenuestream based on physician-driven product standardization (all the whilepreserving freedom of product choice among physicians and hospitals)and provides purchasers (e.g., hospitals) with substantial discounts onthese items with no significant deviation from their standardprocurement procedures—all in a legal, ethical and sustainable manner.Physicians and surgeons in numerous surgical specialties (including,in particular, orthopaedic surgery and neurosurgery) have responded tothe physician-owned GPO model with tremendous enthusiasm. Implantmanufacturers also have responded in a generally favorable way,expressing support for the hospitals and implanting physicians throughtheir responses to proposals, support of physicians’ clinical evaluationsof products and through contracting with the GPOs. Nevertheless, weunderstand that some manufacturers resist any threat of change to theircurrent relationships with surgeons and any alteration to their currentsales model. This response may spring from a misunderstanding of theGPO’s business structure and of the proposed arrangements betweenphysicians, hospitals and manufacturers.On September 6, 2006, AdvaMed (a device manufacturer tradeassociation) sent a letter to the Department of Health & Human ServicesOffice of the Inspector General (OIG) requesting guidance on physicianinvestments in GPOs, device companies and distributorships. Inparticular, AdvaMed asked the OIG to confirm that the OIG’s 1989Special Fraud Alert and other guidance on joint ventures applies todevice firms, to assess whether the amount of revenues generated byphysician investors is a factor in evaluating these arrangements, and topublish additional guidance specific to device firms. On October 6, 2006,the OIG replied with a very brief letter which referred to and restatedexisting guidance on the general topic of physician joint ventures. Theletter did not contain any new guidance on this general topic, nor did itoffer guidance on the specific topic of physician joint ventures in thedevice field.In response to AdvaMed’s first request, the OIG replied that its“guidance addressing physician investment posted on the OIG’s websiteat oig.hhs.gov is current guidance….Most guidance about joint venturesin not sector specific and applies to all physician joint ventures.” In linewith such guidance, the OIG observed that the anti-kickback statute isintent-based, which means that each arrangement is evaluated on a caseby-casebasis. Second, the OIG confirmed, consistent with postedguidance, that the more the revenue of a firm is generated from physicianinvestors, the greater the risk. Of course, this is nothing new. The OIGnoted that the small entity investments safe harbor places a limit of 40percent on revenue generated by physician investors. Finally, the OIGdeclined to issue any sector-specific guidance regarding physicianinvestment in device firms. In summary, the letter does little more thanreaffirm existing guidance regarding physician joint ventures and thesmall entity investment safe harbor. Also, and contrary to the editorialopinions of AdvaMed and several of its members and affiliates, theOIG’s letter does not appear to signal a change in the regulatoryenforcement landscape, nor does it present any undue cause for concernfor organizations which have been founded on a business model that fitsentirely within the safe harbors to the Federal anti-kickback law.As the correspondence between AdvaMed and the OIG demonstrates,successful physician-owned GPOs must be carefully structured andoperated to comply with various Federal, state and local laws andregulations. Indeed, if improperly structured, the potential gains ofphysician-owned GPOs can result in problems for physicians andparticipating hospitals. Through consultation with leading national healthcare attorneys and other advisors, business models can be designed tocomply with existing anti-kickback safe harbors and to comply withStark self-referral parameters, and other similar Federal, state and locallaws.continued on page 3432 Orthopaedic Product News • January/February 2007

Enquiry No 13

SURGEON AS ENTREPRENEURcontinued from page 32A properly designed physician-owned GPO model provides physicianowners with control of the implant selection process with an ethical,legal and sustainable ancillary revenue source, and also supplieshospitals with fair and predictable pricing and with a rational clinicalselection process encouraged by the intrinsic alignment of financialincentives. This offers hospitals a solution to the escalating costs ofphysician preference products through significant savings in totalimplant costs and through inventory standardization.The physician-owned GPO model alters the dynamics of thesurgeon/hospital/manufacturer relationship in a way that benefitshospitals by lowering device costs; benefits physicians by providingthem with a legal, ethical and sustainable ancillary revenue source and byencouraging cooperation between the medical staff and hospitals indevice selection and quality assurance; benefits manufacturers byallowing them to build market share in areas and in hospitals from whichthey had effectively been shut out previously; and benefits patients andthird-party payors by reducing the overall cost of implants.The physician GPO model effectively rationalizes the implantselection process and introduces competition for market share based onclinical applicability, quality, support and price. By properly aligning theincentives of the implanting physicians, hospitals and patients, costreductions can result without the need to restrict patients’ access totechnology and without unduly limiting the surgeon’s ability to select thebest implantable device for the specific patient at the time ofimplantation.John M. McGuire, M.A., C.P.A. is Co-founder and Chief OperatingOfficer of Surgical Implant Services. Mr. McGuire’s experiences includeover 14 years of business and operational activity in the corporatecommunity, organized medicine and healthcare manufacturing industry.He can be reached at jmcguire.sis@comcast.net.Enquiry No 42Enquiry No 1434 Orthopaedic Product News • January/February 2007

Enquiry No 15

ARTICLEThe Anterior Supine Approach inTotal Hip Arthroplasty BenefitsPatients and Your PracticeAuthor: Steven R. Myers, M.D., FACSIn the past ten years, total joint replacement surgery has seen dramaticimprovements in both the sophistication of the implants and thetechniques utilized to insert them. Long lasting bearing surfaces havegiven orthopaedic surgeons and patients newly found optimism thatthese prostheses will outlast all but the youngest of patients. Early studiesin both laboratory and clinical settings are showing wear characteristicsthat were previously unparalleled.With these advancements, orthopaedic surgeons have also developedMinimally Invasive Surgery (MIS) techniques that intend to reduce thesurgical trauma associated with the procedure, thereby allowing aquicker recovery and return to normal function. Total Hip Replacement(THA) MIS techniques have become popularized in both medical and laypublic literature, creating a new expectation for patients who are seekingstate of the art treatment.The Anterior Supine approach to the hip is an MIS technique that isgaining popularity because of early published reports of rapid recoveryenjoyed by patients. Actually a modification of the Heuter techniquethat was used in the 19th century for treatment of infected hips, thisapproach was first used for prosthetic replacement of the femoral headby the Judet brothers in Paris in the 1940s. As the name implies, thepatient is positioned in the supine position on the operating room table,and the approach is accomplished through a ten centimeter incision thatenters an intermuscular space avoiding injury to the surroundingmuscles, tendons and soft tissues. Both the acetabular and femoralcomponents are inserted through this incision, making further incisionsunnecessary.The Judet brothers also devised a novel operating room table thatassisted in the positioning of the patient so that the prosthesis could beinserted more easily. The table controlled the position of the leg in anextended position at the hip, thereby pointing the femur up into theincision and improving its visualization. This table is still in use in Parisby the son of Robert Judet.When American surgeon Joel Matta returned from his fellowship inParis and wished to continue use of the Anterior Supine technique for hisown patients, he worked with Orthopedic Systems, Inc. to create amodern version of the Judet table. This table soon gained interest whenother orthopaedists recognized the advantages of the Anterior Supinetechnique, but needed the assistance of this device to position thepatient’s leg during surgery. At first glance the table resembles otherfracture tables, but offers several advantages:1. The patient’s leg can be placed into a position of extension at the hip– a feature that cannot be duplicated by other conventional tables.2. The patient can be x-rayed from “nose to toes,” meaning that a C-arm image intensifier can view the entire patient – particularlyuseful in a trauma situation.3. The leg spars are removable for easier table storage.The patient’s feet are placed into padded boots that attach to the legspars, allowing an operating room assistant to manually adjust theposition of the leg while maintaining sterility. With the leg thuspositioned and controlled, the procedure can be accomplished in lessthan one hour.Over 450 patients have undergone THA using the Anterior Supineapproach since its introduction at Penrose-St.Francis Hospital inNovember 2003. The yearly volume of total hips has doubled since thattime, without an aggressive marketing effort. Patients from 16 stateshave traveled to Colorado Springs for this treatment, as well as allregions of the state of Colorado. As use of the Internet has increased,patients have become more sophisticated consumers, and now seek outnew and emerging technologies as quickly as physicians learn to usethem. Technology that is easily understood by the lay reader and offers aclear advantage will inevitably be adopted by their treating physicians.The Anterior Supine technique for THA will undoubtedly continue togrow as one of those attractions.Dr. Myers is Chief of Staff-Elect at Penrose St. Francis Healthcare inColorado Springs, and is a member of the Colorado SpringsOrthopaedic Group, where he specializes in Hip and KneeReconstructive Surgery. Dr. Myers can be reached at smyers@csog.net.Enquiry No 4336 Orthopaedic Product News • January/February 2007

Enquiry No 16

PRODUCT NEWSExcia ® Hip SystemExcia ® specifically addresses three aspects of a modern hip stem. Theprosthesis design, implantation technique and implant surface form thefoundation for success in primary hip replacement surgery.Excia is implanted using a newly designed rasp that works for boththe cementless stem which is coated with a calcium phosphate layer andthe cemented stem with a distal centralizer. Another distinguishing featureof Excia is the narrow 8/10 mm trunnion, which increases the rangeof motion by up to 15% greater than the standard 12/14 mm trunnion.The lateralized options of the Excia stem further enhance the stabilityof the joint without affecting leg length.Excia was also developed for computer navigation and supports lessinvasive surgical techniques, thus making it well-equipped for the futureof hip replacement surgery. Visit us at the AAOS, Booth #3332.Aesculap Implant SystemsTel: 866-229-3002www.aesculapimplantsystems.comEnquiry No 44Anti-Extravasation InstrumentCannulaCannuflow’s innovative EntreVu TM anti-extravasation instrument cannulamakes interstitial swelling during shoulder procedures a thing of the past.The company’s patent-pending Extravastat anti-extravasation technologyis incorporated into the cannula 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 the 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 to moveto 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 45CellTrans Postoperative Autologous AutotransfusionDeviceSummit Medical Limited received FDA 510(k) clearance to market the CellTrans Postoperative AutologousAutotransfusion device, used in total knee and total hip replacements. Summit Medical is the British manufacturerof the CellTrans.The CellTrans operates in accordance with the American Association of Blood Bank guidelines and isuniquely designed with two separate blood bags, allowing for the collection and reinfusion of up to 1,200ml ofautologous blood. Fully supported with audit data and over five years of extensive use in U.K. and otherEuropean hospitals, this product has been shown to offer benefits to both patients and clinicians.Summit Medical has been trading for over 20 years and has a worldwide reputation for the design and manufactureof niche, quality, single use medical devices. In addition to its experience in autologous blood products,Summit is best known for its range of bone cement mixing devices.Summit Medical is seeking a U.S. distributor for the CellTrans device. For more information please contactNeil White, Head of Export Sales: neil.white@summit-medical.co.ukSummit Medical LimitedTel: 44-1451-821311www.summit-medical.co.ukEnquiry No 4638 Orthopaedic Product News • January/February 2007

PRODUCT NEWSALLthread Suture AnchorsMaterial makes the difference!Biomet Sports Medicine ispleased to introduceALLthread Suture Anchors—available in a variety of materialsto allow the surgeon to select fixationmethods based on theneeds of the patient. Offered intitanium, PEEK-Optima ® polymerand LactoSorb ® L15 copolymer,these anchors are fullythreaded for cortical bone fixation.Independent, dual eyeletsloaded with MaxBraid Sutureallow for easy sliding whileassisting with suture management.For more information, contact your local Biomet Sports Medicinerepresentative or call 800.348.9500, ext. 1501. Visit our web sitewww.biometsportsmedicine.com.PowerTek Capital SystemBiomet Sports Medicine, formally Arthrotek, is excited to announce thelaunch of our new stand-alone capital system—The PowerTek CapitalSystem. The three-chip, all-digital PowerTek Camera has a lightweightcamera head with programmable buttons. It features unique software toenhance depth perception for natural color reproduction.The PowerTek II Plus Shaver System has a maximum speed of12,000 RPM. A unique tool mode allows for rapid increase and decreasein speeds when changing from blade to bur. The handpiece has multifunctionalbuttons to increase/decrease speed and cycle from forward, reverse,and oscillate.The PowerPump ® LT System combines safety with simplicity. Tobegin, set the pressure and start to operate. It will calibrate the flow basedon the pressure you select. Its software controlled instrument recognitionsenses and automatically adjusts for sheath restrictions to maintain anaccurate joint pressure reading and regulates joint pressure so the surgicalsite does not over distend.For more information, contact your local Biomet Sports Medicine representativeor call 800.348.9500, ext. 1501. Visit our web site www.biometsportsmedicine.com.PEEK-Optima ® is a trademark of Invibio Ltd.Biomet Sports MedicineTel: 800-348-9500 ext.1501www.biometsportsmedicine.comEnquiry No 47Combination Outflow andAnti-Extravasation Scope SheathCannuflow’s TwoVu TM EX combinationoutflow and antiextravasationscope sheath deliversa simple solution to minimizingand controlling interstitialshoulder swelling during percutaneousarthroscopic shoulder procedures.The patent-pending, softpolymer, low-profile device slipseasily over an arthroscope’s ownsheath and uses Cannuflow’s Extravastat anti-extravasation technology toprovide a dedicated outflow channel from the joint space as well as a completelyseparate anti-extravasation outflow channel.• Minimizing interstitial fluid saturation ensures that tissue quality ismaintained.• Continuous outflow maintains excellent visual clarity and fluidpressurethroughout procedure.• Eliminates having to switch from inflow to outflow on the scope toremove 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 procedure.• Insulates the metal scope sheath, preventing interference with RFablation or thermal remodeling devices.CannuflowTel: 866-484-5400 or 408-764-0220www.cannuflow.com Enquiry No 48All trademarks belong to Biomet Sports Medicine, Inc.Biomet Sports MedicineTel: 800-348-9500 ext.1501, www.biometsportsmedicine.comEnquiry No 49To see your productslisted within the Product Newsand Product Feature sectionsemail your information to usopn@orthoworld.comJanuary/February 2007 • Orthopaedic Product News 39

EXECUTIVE PROFILEReinhold SchmiedingPresident & Founder, Arthrex Inc.Reinhold Schmieding founded Arthrex in Munich, Germany in 1981 as anAmerican expatriate. In 1991, after successfully expanding Arthrex GmbH, theeastern hemisphere headquarters near Munich, Germany, Reinhold returned to theU.S. to relocate the U.S. headquarters to its current 130,000 square foot westernhemisphere headquarters location in Naples, Florida. Reinhold is originally fromMichigan with a Bachelor of Science in Physiology from Michigan State University.U.S Orthopaedic Product News (OPN): Arthrex is considered one ofthe most successful privately held companies in orthopaedics, specificallyin arthroscopic surgery. Can you summarize your uniquehistory?Reinhold Schmieding (RS): Arthrex was founded solely to helporthopaedic surgeons treat their patients better by providing innovativeproducts and medical education services to facilitate performing upperand lower extremity procedures arthroscopically, versus traditional opensurgery methods. This mission has been preserved by building thecompany privately, without outside financial investors to detract us fromdoing the right thing from a scientific and medical perspective. With anabsence of outside financial performance pressure and expectations, wecan maintain our commitment to helping surgeons and patients first andforemost. Our contribution to evidence-based medicine is our primarybenchmark of success. This is fundamentally what separates Arthrexfrom other orthopaedic device companies.OPN: Why is Arthrex considered a market leader in arthroscopicsurgery?RS: Our 25-year history has been driven by our unique ability to design,manufacture and market innovative products that helped facilitate thetransition to arthroscopic knee and shoulder repair and reconstructionsurgical procedures. As a product designer, my early years were spentprimarily in the operating room with surgeons all over Europe and theU.S. to intimately appreciate the surgical obstacles they encountered intreating joint pathology arthroscopically. We were able to design uniqueproducts to solve their surgical problems and have them manufactured tothe highest quality standards. Today, an extensive team of engineers atArthrex is actively involved in the product design and manufacturingprocess. My 25-year experience in product design and arthroscopicsurgery procedures allows me to still contribute significantly to thedesign and quality assurance process today. During the past 25 years,Arthrex has designed and developed and now markets over 3,000products in over 100 countries worldwide, with an unprecedented 443new products released last year for arthroscopic and minimally invasiveorthopaedics.OPN: Arthrex also has a reputation for their unique commitment tomedical education. Why is this important?RS: Producing safe and effectiveproducts is only part of theresponsibility in assuring safeand reproducible patientoutcomes. Arthrex assumes ahigher responsibility ofproviding orthopaedic surgeonsand surgical staff an unprecedentedhands-on cadavericlearning experience in motorskills surgical labs around thecountry. Our surgical skillsprograms (See Figure 1.) attractFigure 1. Our surgical skillsprograms attract over 3,000surgeons and staff a year to ourfacilities.over 3,000 surgeons and staff a year to our facilities in Naples, Florida;Scottsdale, Arizona; and Los Angeles, California to learn new, innovativearthroscopic surgical procedures in the knee, shoulder, hip, elbow and aprogressive new program for foot and ankle procedures. Many of ourdistributors have also built surgical skills labs to provide localeducational services.continued on page 4140 Orthopaedic Product News • January/February 2007

EXECUTIVE PROFILEcontinued from page 40OPN: What is the NuBOOM that we see on the cover of this publication,and in Figure 2?Figure 2. NuBoom TMRS: NuBOOM is a platform technology with complete OR functionintegration capabilities the does not require ceiling suspensionsystems. It is capable of routing a true end-to-end HDTV 1080i signal.It can seamlessly route video, MRI, PACS and C-arm images througha simple touchscreen control panel. The monitor arms have superiorpositioning capabilities, giving surgeon and staff optimum viewingangles, regardless of procedure or patient positioning. Unliketraditional ceiling-mounted systems, the NuBOOM will remove allcomponents from the floor including the arthroscopy pump andelectrosurgical generator. Using Arthrex hand-controlled OPES® RFprobes and hand-controlled or wireless footswitches for the shaversystems effectively removes all cords or foot pedals from the ORfloor.NuBOOM can be installed into a facility in 24 hours without ORreconstruction or downtime. This compares favorably to ceilingmountedboom installation, which requires months of project planningand potentially weeks of downtime due to ceiling reconstruction.NuBOOM also allows existing facilities to upgrade to the latesttechnology not previously possible due to structural limitations or theloss of revenue by taking an OR offline for an extended period. Again,Arthrex looked first to provide an innovative and cost-effectivesolution to our customers system integration needs.OPN: Can you give more specifics on the C3 program that reducesarthroscopic surgery procedure costs?RS: Not only has Arthrex built technology to make the arthroscopicsurgery suite more effective and efficient, we have also incorporated newtechnology that lowers the per-procedure cost compared to otherarthroscopy systems. C3 (See Figure 3.) stands for “Comprehensive CostContainment,” which describes our goal of designing more efficient andcost effective products required for every arthroscopy procedure to helpaddress declining reimbursement trends.Figure 3. Elements of the C3 programFirst, the fully autoclavable HD camera system and arthroscopesfrom our global partner in orthopaedics, Olympus, obsolete the need forSteris equipment and respective cartridge costs for sterilization.Turnaround time is much faster, and autoclaving eliminates the film thatbuilds on the optic lenses from the paracetic acid process that requirescostly maintenance. The pressure-sensitive Arthrex pump system facilitatesuse of the main pump tubing for the entire surgical day with a perprocedurereplacement of an inexpensive extension tubing piece to thepatient. Unique backflow restrictors and touch proof high flow connectorsensure complete sterile integrity during tubing connections. Sincethe main pump tubing is a closed sterile system, irrigation fluid bags canbe used completely for multiple procedures to dramatically reduce fluidwaste and nurse preoccupation with replacing single bags during andafter the case. The shaver system has a special autoclavable rack thatcontains a select assortment of blades and burrs. Each blade and burr canbe used between five and ten times until the surgeon decides that reducedperformance requires its replacement. This dramatically reduces the costof two or three single use blades or burrs traditionally used for aprocedure. The final component is the innovative RF system. TheOrthopaedic Procedure Electrosurgical System (OPES) providesdigitally controlled bipolar technology for open procedures andmonopolar technology for arthroscopic ablation or coagulation requirements.The hand controlled probes eliminate the need for a foot pedal andare priced less than competitive RF probes. All together, the componentsof the C3 system can reduce costs between $100 and $200 per procedurewith products that perform better and enhance reproducibility for safeand successful patient outcomes.continued on page 42January/February 2007 • Orthopaedic Product News 41

EXECUTIVE PROFILEcontinued from page 41OPN: Arthrex has traditionally been known for its procedure specificproducts. What's new this year?AGV: Arthrex has introduced exciting new ways to arthroscopicallyrepair rotator cuff tears that reproduce the anatomical footprint of therotator cuff to the tuberosity in a double row technique without the needto tie arthroscopic knots. (See Figure 4.) Bioabsorbable knotlessanchoring technology has revolutionized arthroscopic repair of labraltears in the hip and shoulder. All-inside ACL reconstruction (See Figure5.) eliminates the need for traditional transosseous tunnels for graftpassing and fixation. The RetroConstruction system facilitatesretrograde drilling of sockets in the knee versus tunnels as a less invasiveand cosmetically pleasing procedure with reduced morbidity. With 443new products released and approved last year and over 250 more in thepipeline, Arthrex is poised to make a real difference in the way joints willbe surgically treated for years to come.Figure 5. All-Inside ACL ReconstructionFor more information or to comment on this article, please emailinformation@arthrex.com.Figure 4. Knotless Double Row Rotator Cuff RepairEnquiry No 50Attention Orthopaedic SurgeonsIf 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: usopn@orthoworld.com42 Orthopaedic Product News • January/February 2007

Enquiry No 17

SURGEON AS ENTREPRENEURThe Long and Lonely Road:Life as a Surgeon InventorAuthor: Ron Clark, M.D.In 2005 I founded Valpo Orthopedic Technology in order to commercializemy inventions. This year marks the release of its first product, the Adjust-Rite tibial ligament fixation system. Time and clinical outcomes willdetermine the utility and success of this device.Many are intrigued by the process that leads to new medical devicedevelopment, and believe that they too have concepts that can lead toimplants or instruments. Perhaps this review will motivate another apt andcreative mind to begin the path towards such a prospect. Most of what Ihave learned has come from my experiences, and I couldn’t say whetherthey are likely to be typical for others. What I will say is that most surgeoninnovators are by nature “independently minded,” and don’t necessarilycollaborate well with other surgeons. Many implant companies attempt toorganize committees of renowned surgeons to bring new ideas to market.It seems that a greater number of surgeons assigned to a given task willultimately prolong the project. Many such committee projects are neversuccessfully launched. Some companies bypass the surgeon developercompletely, opting instead to sample surgeons for device enhancementideas and tasking engineers with the creative and developmental responsibilities.Unknowingly, many surgeons give millions of dollars away todevice companies through disclosures that are not properly protected anddocumented.The best advice that I ever received about device development camefrom my fellowship director, E. Marlowe Goble of Utah. He told me thatan idea without a patent to describe it is worthless, and encouraged me topatent any concept that I wanted to explore and develop into a device.What one quickly learns, however, is that not only are patents expensive toacquire and maintain, but they do not of themselves lead to businesssuccess (unless your name is Gary Michelson). Aside from getting yourconcept patented, you will need to have a working prototype and apathway for FDA clearance worked out in advance. The problem withnovel devices is that until you can actually put a few in and try them out,a number of things can go wrong and the device will always need revision.Therein lies the problem with working with a technology that is licensed,because as others gain experience with its deficiencies, further creativityinitiates solutions that obsolete the licensor’s novelty. On many occasions,I’ve ultimately found myself competing against myself due to innovationsto concepts that I originally conceived, such as cross pin femoral ligamentfixation for hamstring tendons that Dr. Goble and I developed in 1992.This technology has all but been rendered obsolete by a productsubsequently marketed by one of the sports medicine companies.I have observed that the most successful orthopaedic surgeon inventorsend up forming and owning their own development companies. You canlearn a lot by getting to know them, and I have found them almost alwayswilling to share something they learned along the way. To be certain, mostsurgeons are jealous of one another and prefer to work without collaboration,which is probably why industry executives outperform orthopaedic surgeonseconomically—because they have learned how to work with people ratherthan against them. Surgeon names like Bonutti, Steffee, Johnson and Pettyhave all done well in building viable enterprises around them.Unfortunately, even successful surgeon inventors watch others profitfrom their creative endeavors as venture capitalists and industry managerscome into the picture and thus dilute the surgeon creator’s ownership of theidea and the business. It is not unheard of for the surgeon inventor to endup with less than ten percent of the total economic worth of an endeavorlaunched from his creativity.I wish that I could tell my colleagues about a sure-found pathway tosuccess, but since my efforts are still very much a work in progress, I’mnot in a position to proffer any specific advice. I will, however, offer someof my own experiences.Finding a patent attorney who is experienced with medical devices(especially orthopaedic ones) is quite challenging. Those who are experiencedin the art usually have conflicts of interest which limit taking on newprojects, especially if your concept is in an area in which they are workingwith other clients. Patent law is similar to any medical specialization. Goodpatent attorneys have read “the literature” and are aware of case law thatwill dictate the likelihood that the patent will be enforceable. The othercritical issue revolves around infringement. As crazy as it sounds, the U.S.Patent Office will issue you a patent that violates another patent’s claims,so having a patent awarded does not of itself mean that your concept is freeto be practiced. Your idea will need to have both patentability and infringementanalyses. Budgeting for patent costs will vary by the complexity ofthe device and time needed, but would be a minimum of $10,000 and couldexceed $50,000. Patents need to be renewed every four years, which willadd another $3,000 to $4,000 each time. Don’t think that a single patentwill protect your idea, either. Engineers are very resourceful, and very fewpatents successfully control an entire area in orthopaedics. Almost all totalknees have patents specific to their manufacturer, however, there are tensof different brands of total knee devices. Therefore, you should plan on atleast three different patents to try to shield your creation.continued on page 4644 Orthopaedic Product News • January/February 2007

Enquiry No 18

SURGEON AS ENTREPRENEURcontinued from page 44The next step will involve building a prototype of the device andarranging for mechanical testing. This again requires skilled talent withexperience. The annual AAOS meeting includes a number of companiesthat will subcontract device prototyping and manufacturing. Pricing willvary, but one would want to budget $10,000 to $30,000 for an initial set ofdrawings and very crude prototypes. This step is critical, as I have heardstories of surgeons getting patents for devices that were mechanicallyimpossible to make. Computer drafting can make images appear on thescreen which either cannot be fabricated, or are so complex that theexpense of manufacturing is so high that the device will not be marketable.This now brings us to the business argument. Before even getting tothe patent process, the surgeon inventor needs to learn a little about thebusiness of medical devices to decide if a market exists for the invention.The mere fact that someone may be willing to use the device doesn’tnecessarily assure commercial success. The big orthopaedic concerns haveproduct lines that bring in nine figures in annual sales volumes. Most ofthese companies will not be interested in a project unless they can projectannual sales volumes of $10 million or greater. A surgeon may have awonderfully novel device that could net a profit of $500,000, enough toreplace his surgical income, but not be able to sell a large orthopaedicconcern on the concept because they are focused on bigger transactions.This doesn’t mean that the surgeon doesn’t have any market for theinvention, but it may mean that he needs to target a smaller company totake his device to market—or be willing to bring the device to market allby himself.Many surgeons try to sample the waters by discussing their idea for aproduct with their local medical device sales representative. Sometimessurgeons get misled by the enthusiasm that their local rep may share inlearning about the surgeon’s idea and offering to take him to headquartersso that the management can consider the project. Surgeons frequently don’tunderstand the dynamics of the sales force mentality. Your medical devicerepresentative is usually getting paid in some form to say all kinds of nicethings about you, your kids and even your inventions just to keep thosesales commissions rolling in. The corporate executive has a completelydifferent perspective. Depending on how much authority and responsibilitythat individual has, his main objective is not to make any decision thatmakes him look bad. Most orthopaedic companies show perpetual gainsfrom year to year. In the corporate world, people are “graded” by sales orprofitability numbers. If your numbers get bigger from year to year, yougenerally go up the ladder; if they should stay even or worse, go down,your job is in jeopardy. Therefore, with limited research budgets (oftenalready committed to other projects), most companies—even the “bigones”—are not in a position to take on surgeon-conceived projects. Thereare a few companies that have developed “portals” to allow surgeons towork in a cooperative basis with the company on projects, but I’m notfamiliar with many devices with significant sales volumes that haveentered the market from such relationships.So what’s a surgeon supposed to do with an idea that he is certain willbe useful for colleagues and patients alike? The answer lies in whether thesurgeon is willing to walk the “long and lonely road.” Long because it willinvariably be four or five years before any device sales will materialize,and lonely because almost everyone you meet will tell you why your ideawon’t work. The surgeon should also note that all the while that he ispursuing his dream, the marketplace is dynamic and the risk always existsthat the device will become obsolete due to competitive technology. Mostsurgical innovation comes in response to a surgeon having identified aproblem area. If you have identified a problem and come up with asolution, so have others, and there is a whole world of research going onbehind closed doors unbeknownst to you. A current example comes fromknee replacement technology. In a number of locations, arthroscopicapproaches to partial and ultimately total knee replacement are beingworked out. I will go out on a limb and predict that by 2012, knee replacementswill predominantly be performed arthroscopically for the majorityof U.S. cases and that overnight hospitalizations will be a thing of the past.The same evolution in surgical approaches for knee ligament proceduresthat took place in the 1980s will ultimately take place for the surgicaltreatment of knee arthritis. Pity the poor total joint surgeon who hasforgotten how to use the arthroscope since he was in residency.If you are committed to walk the long and lonely road, then I suggestthat you put yourself in an environment in which you can devote at least15 hours a week to the process, and find teammates with whom to sharethe dream. You will need a business attorney to establish a corporation, andsomeone to coach you on the fundamentals of accounting andbookkeeping. This list actually gets longer and longer, so I suggest that youfind local resources for business development such as incubators orenterprise zones. Ultimately you’ll need to develop a business plan andconsider the financial implications for bringing a device to market. Thiswill probably require a minimum commitment of $2 million, but it doesn’tall have to come out of your pocket. You will, however, need to fund theinitial legal and engineering process that will likely approach $200,000 to$300,000. There’s no way that you will be successful and concomitantlyspend 60 hours a week in your practice, so your compensation will likelysuffer as a result. This should be budgeted for. I recommend that priorto forming a business entity, one read The Art of the Start by GuyKawasaki.Your overall geography can also be critical, as finding the necessaryparticipants for your venture will be enhanced if you live in California,Florida, Indiana, Massachusetts, Michigan, Ohio or Texas. To findinvestors willing to fund high-risk ventures like medical devices, you arelimited principally to the coastal states. Once your company is funded, youwill need experienced management on board. Recruiting them to take achance on your venture can be almost as difficult as finding the investors.I have been fortunate to have learned from and been inspired by manytalented individuals whom I credit for contributing to my surgicaleducation: the many entrepreneurial surgeons who shared their opinionsand advice on how to create medical devices, as well as many talentedindividuals with whom I was partnered in practices as I moved closer andcloser to Warsaw, Indiana, to advance my opportunities in medical devicedevelopment. While the ultimate future of Valpo Orthopaedic Technologyas an enterprise is unclear at the present time, the adventure has been thejourney of a lifetime.Ron Clark, M.D. is President and Founder of Valpo OrthopedicTechnology, Inc. He can be reached at rc@votechnology.com.Enquiry No 5146 Orthopaedic Product News • January/February 2007

Enquiry No 19

ENTREPRENEURIAL EVENTS CALENDARJanuary 2007January 21-23Comparative Healthcare SolutionsNational Summit on Quality/Performance Management andCompliance in HealthcareVenue: The Rosen Centre, Orlando, FLTel: 888-243-0281www.chspartners.com/conferenceFebruary 2007February 12-13Second Annual Stem Cell SummitVenue: Wyndham San Diego at EmeraldPlaza, San Diego, CAwww.stemcellsummit.comFebruary 13First Albany Capital Small-CapOrthopedics ConferenceVenue: Marina Village, San Diego, CAwww.firstalbany.comFebruary 26-28Investment In Innovation (In3) WEST:The Premier West Coast StrategicPartnering and Investment MeetingVenue: Hyatt Regency Hotel, Irvine, CAwww.medtechinsight.com/in3-19.htmlMarch 2007March 12-15Cowen & Company27 th Annual Health Care ConferenceVenue: Marriott Copley Place, Boston, MAwww.cowen.com/UpcomingConferences.aspApril 2007April 19-20The Beard Group Annual Conference onHealthcare Transactions SuccessfulStrategies for Mergers, Acquisitions,Divestitures and RestructuringsVenue: Chicago, ILwww.beardconferences.comMay 2007May 14-15Rodman & Renshaw 4 th Annual GlobalHealthcare ConferenceVenue: Monte Carlo, Monacowww.rodmanandrenshaw.comJune 2007June 3-5Investment In Innovation (In3) MedicalDevice SUMMIT: A Preview of Early-Stage Medical Technology CompaniesVenue: Grand Hyatt, San Francisco, CAwww.medtechinsight.com/conferences.htmlEnquiry No 2048 Orthopaedic Product News • January/February 2007

Enquiry No 21

ORTHOINVESTOR UPDATEU.S. Hip and Knee IndustryGrowth Recovery ContinuesAuthor: Robert C. FaulknerWelcome back to this regular temperature-taking of the orthopaedicreconstructive surgery industry, with a focus on the U.S. market. As youmay recall, we have been tracking the progress of and speculating on thefuture of the cycle in orthopaedic market, the hip and knee markets inparticular. Since just mid-2004, we have seen the business go from headygrowth of over 20 percent annually, to precipitous deceleration to just sixpercent, to battles over price, and now to stabilization. We can onlyconclude that this present cycle appears to be a 24-hour flu-like version.So far, we have had less than two years of negative average selling price(ASP) trends. The negativity has not exceeded two percent, and that wasfor perhaps a quarter only. By comparison, the mid-1990s showed almostsix years of negative ASP trends. We will update you on the trends in theleading indicators we use to help predict growth and highlight some ofthe Wall Street debate on why this cycle may or may not be different, aswell as give our forecast and how it has changed since we last exploredthe topic.As a refresher on the industry’s cycle, we repeat that U.S. orthopaedichip and knee pricing is cyclical and appears to be driven by the hospitalpricing cycle. Orthopaedic and other manufacturers are able to raiseprices to hospitals so long as hospitals are able to pass the increases alongto insurers. The dynamic is not dependent upon procedure reimbursementso much as a broader environment.At our last discussion (“A Hint of Dawn on the Horizon,” July/August2006), we had been in the down-sweep of the cycle for two years andwere seeing hints of stabilization. The hints were telling the truth, and,since then, hip growth has shown stability for over a year (adjusting forhurricane-related disruptions), while knees started to stabilize. At thispoint, we think that the question is less whether and more when thebusiness will reaccelerate, and not whether it will resume deceleration ingrowth. We base this on our leading indicators, which have actuallyinflected from what appeared to be early stabilization six months ago toa strong uptrend in price growth for hospitals. We use the U.S. government’sConsumer Price Index (CPI) number for hospitals, and as you cansee in Figure 1, this trend inflected over a year ago and is now on a solidtrend line—strongly up. If history repeats, orthopaedic pricing will be onthe rise sooner than later.Figure 1: Orthopaedic vs. Hospital Pricing, 1988-2006Sources: Bureau of Labor Statistics; Knowledge Enterprises, Inc.; OrthopaedicNetwork News; Thomas Weisel Partners LLC Analysis and Estimates.We discussed last time our belief that stability in hospital CPI shouldlimit further declines in pricing, and this has, indeed, happened. ASPchange appears to be flat or slightly negative, but it is better than it wassix months ago, at the margin. In addition, it appears that Smith &Nephew is charging a whopping $10,000 per hip resurfacing procedure(approximately). Even limited adoption of a device at this price willsupport ASP growth for the industry if it holds.So why is the current cycle shorter in duration than the last one? Wesuspect that the hospitals’ better (actually profitable) health today than incontinued on page 5250 Orthopaedic Product News • January/February 2007

Enquiry No 22

ORTHOINVESTOR UPDATEcontinued from page 50the era of the HMO and excess capacity means that they are under lesspressure and have much more pricing power against payers than theyused to. Likewise, there are only three major players in hips and knees,so pricing discipline is a lot easier to come by. Many on Wall Street aredubious that hospitals are actually doing better. They point to unusuallyhigh bad debt expense and the implication that the price captured in CPImay not be the same as the realized price (price minus bad debt). Westick with our comparisons of the industry in this cycle (much healthier)versus the last, and point out that the indicators appear to be actuallyworking. It seems that at the top or bottom of every cycle there is arationale for why the cycle is broken; we hope the same is true now.Is there no bad news? Growth performance is no longer coming inbelow our forecasts, but is still coming in below industry’s and WallStreet’s in general. Many are hoping for a faster recovery than we see inthe cards. That being said, we now see it as a matter of when the industryresumes price growth, not if. What could derail a potential rebound? Aserious weakening of the economy could prevent a real rebound and leadto more price pressure due to employers looking to cut healthcare costs.Stable growth in the economy is sufficient to allow a reacceleration, ifthe last cycle is a guide.In contrast to the last update, industry sales are no longer coming inbelow our forecasts, and we have even started edging up forecasts as weassume a shorter and shallower bottom for the cycle. In the last quarter,total U.S. hip and knee growth was approximately what we assume to beprocedure growth rates—a hard number to obtain on a timely basis—of7.5 percent. This number follows an adjustment to account for what weassume was a one percent reduction in last year’s third quarter growthbecause of the hurricanes. At the last update, we were projecting 6.4percent and 4.7 percent growth for 2006 and 2007, respectively. Atpresent, our forecast is 8.2 percent for 2006 and 7.5 percent for 2007,both meaningful increases in the forecast (See Figure 2.). Moreimportantly, the trend is up in the revisions.We suspect that economic growth over the next year will have a greatdeal to do with the timing and extent of a rebound in growth, as it willdrive the extent of perceived need to continue to drive down healthcarecost growth. Cost containment was until recently limited to the privatesector, but the government has become increasingly focused on the issueof late, though it has proposed no draconian steps to control Medicarecosts. Medicare spending growth will likely slow over the next few yearsas a systematic result of the recent slowing in price growth in healthcareoverall. Medicare bases its increases on price and cost trends that itobserves retrospectively in its annual analysis. Last year’s increase wasa healthy three percent for hospitals. Notably, the government hasnormally jumped into the debate LATE in the cycle. Combined with alack of legislative proposals, it is far from clear to us that the governmentwill do much of anything on this front. (Fill in your own fun politicalcommentary on this observation!)We still reject the industry and Wall Street chorus calling for a yearendrecovery in growth, except due to strengthening foreign currencytranslation and hurricane factors, on the basis of the nature of the cycle.On Wall Street many still expect a recovery, though third quarter wasdisappointing to most, if not to us specifically.As a summary, our positive bias at this point on a short cycle depthand duration versus the last cycle is based on macro factors such as astrong economy, a tight labor market, more hospital consolidation, lesspolitical hysteria (so far, at least, compared to “Hillary-care”) and thelack of the classic highly restrictive HMOs, among others. For theorthopaedic industry, its own consolidation helps bolster its pricingpower against the hospitals even more than it did the last time around.Count the orthopaedic industry out at your peril!Robert C. Faulkner joined Thomas Weisel Partners LLC in October of2006 as a Senior Analyst covering the Medical Devices industry. He canbe reached at 212-271-3760 or rfaulkner@tweisel.com.Figure 2: Orthopaedic Growth and Pricing History and Projections, 2005 - 2010Enquiry No 52For More Information......on any Articles, Ads or Products within the ProductNews or Product Features sections, simply mark thenumbers off the Reader Enquiry Card and send it to us- we’ll put you in touch with the right people.Mail it back to us or fax the card to: 440-247-905352 Orthopaedic Product News • January/February 2007

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PRODUCT FEATURESAAOSTurn Your Standard OR Table Into anAdvanced Spinal Surgery Table!The Allen ® FLEX FRAME TM Spinal System attaches to your existing ORtable for a fraction of the cost of a standard spinal table! The system’scarbon fiber frame provides unhindered C-Arm access. The Wing Setsand C-Prone Head Positioner are designed to manage skin pressure andadjust for a customized fit for each patient. Power from the table allowsyou to adjust the patient from a position of reverse lordosis to extremelordosis intraoperatively.You can also tilt the frame for improved site access. Set-up is simple:three easy steps and the system is locked into place. An integral cartallows for easy transportation and the entire system stores in 2 sq. ft.Allen ® Medical SystemsTel: 800-433-5774 / 978-263-7727www.allenmedical.comAAOS Booth 900Enquiry No 53Ascension ® RADFx ® Proximal RadiusFixation SystemAscension’s new RADFx® system offers a complete solution to proximalradius fractures. The system consists of a compression screw system,fixed angle locking plate and a radial head prosthesis – all in one instrumentset. The system also includes K-Wire fixation and a mini 1.5mmcannulated compression screw – the smallest on the market.RADFx is designed for all mason class fractures. A pre-contoured titaniumradial head plate makes plating fast and easy. The plate is low in profileand available in standard and long configurations. The locking jointline holes provide a stable construct for fractures and can be converted tonon-locking for variable angle screw options.When fractures cannot be repaired, Ascension’s Modular Radial Headprosthesis is available. The Ascension Modular Radial Head is cementlessand addresses all patient needswith standard and long headoptions as well as short and longstem options.Ascension OrthopedicsTel: 877-370-5001www.ascensionortho.comAAOS Booth 4700Enquiry No 54ARC Wrist Traction TowerThe ARC Surgical Wrist traction tower is an excellent example of formfollowing function. Featuring an advanced design and quality, thetower produces and maintains traction with ease while allowing betteraccess to the wrist from all angles.Drop the support arm to the horizontal position and the tower becomesan invaluable aid in treating distal radius and other wrist/hand fractures.Providing an “extra set of hands” that can be so valuable in theOR, the ARC Surgical Wrist traction tower is an assistant whose timehas come.• Exceptional Surgical and C-armAccess• Adjustable Forearm Support• Vertical/Horizontal Support Arm• Allows 3-DOF Positioning ofPatient’s Wrist• Fitted Non-slip Finger Traps in 4SizesARC Surgical LLCTel: 503-645-9300www.arcsurgical.comAAOS Booth 0321Enquiry No 55Biotrak - Headless ResorbableScrewThe Biotrak – Headless Resorbable Compression Screw System uses avariable pitch/tapered design to compress bone fragments without the useof a head. With minimal instrumentation, the Biotrak System offers astraightforward technique that utilizes a unique tapered driver to engagethe screw along its entire length. The screw ejector sleeve pushes thescrew off the driver to maintain fragment position.Biotrak screw features:• Headless• Cannulated• Variable Pitch Threads• 100 % PLLA (Poly L-Lactic Acid)• Unique Driver and Ejector System• Five Lengths (16, 18, 20, 22, and 24mm)ARC Surgical LLCTel: 503-645-9300, www.arcsurgical.comVisit us at AAOS in San Diego, Booth 312. Enquiry No 5654 Orthopaedic Product News • January/February 2007

PRODUCT FEATURESAscension ® Flexiglide ® BioresorbableBarrier Sheet● Minimizes Tissue Attachments● Supports Soft Tissue Repair● Wraps Injured Nerves and Tendons● Bioresorbable, TranslucentAdhesions are a common surgical complication that can cause seriouspost-operative problems, such as loss of motion or pain. Ascension ®Flexiglide ® is a translucent, resorbable protective film that minimizes tissueattachments and can be used in a variety of applications – tendon,nerve and soft tissue.Flexiglide is made from 100%biologically safe synthetic materialthat retains initial mechanicalproperties for ten weeks. UseFlexiglide to help minimize tissueattachments and provide supportand protection during the criticalhealing time post-operatively.Temporary Shoulder SpacerThe InterSpace Shoulder, which recently received FDA clearance, is a temporary,PMMA-based spacer, impregnated with gentamicin, designed to aidthe orthopaedic surgeon in management of infected total shoulder arthroplasty.The InterSpace Shoulder is pre-formed and offers the surgeon unparalleledconvenience and ease of use. The InterSpace Shoulder providesmany patient benefits as well:1) Maintains glenohumeral joint space2) Enables patient mobility during the interval of spacer management3) Opposes soft-tissue contraction, facilitating the second-stageimplantation4) Local release of gentamicinThe InterSpace Shoulder is indicated for use in the first stage of a two-stagerevision of an infected total shoulder arthroplasty. The device can beimplanted for a period of six months, after which it must be explanted. TheInterSpace Shoulder is distributed in the U.S. by Exactech and manufacturedby Tecres S.p.A.Ascension OrthopedicsTel: 877-370-5001www.ascensionortho.comAAOS Booth 4700Enquiry No 57BioPro Hemi Implant SystemBioPro’s Hemi Implant System is the most complete offering availablefor MTP joint resurfacing. Manufactured from cobalt chrome in foursizes, the Great Toe implant is available both porous and non-porouscoated. Additionally, BioPro offers the Lesser Toe implant in nine sizesfor digits two through five. In-house manufacturing allows for quickturn-around of custom implants, should a standard implant not meet thesurgical requirements.The BioPro implant is the most extensively studied toe replacementavailable. It has been successfully used since 1952 and has a 38-yearclinical study showing a 97.4% survivorship rate. Additionally, multipleindependent studies available show similar results.The BioPro hemi toe is simple to implant, removes the minimum amountof bone possible, and preserves the anatomy of the MTP joint. The conservativebone removal and simple surgical technique allow for easily reproducibleresults. It offers patients pain relief, restores range of motion andallows for a return to an active lifestyle.BioPro Tel: 800-252-7707www.bioproimplants.com AAOS Booth 2733Enquiry No 59Exactech Inc.Tel: 800-392-2832www.exac.comAAOS Booth 2238 Enquiry No 58CDC Design’s Hip & Knee ClearCastBone ModelsCDC Design’s Hip & Knee ClearCast Bone modelsare the finest quality, lowest cost clear acrylicmodels in the orthopaedic industry. Anatomicallyexact Hip & Knee ClearCast Bone models areproven patient education aids that will help reduceoffice visit duration by increasing patient understanding.CDC Design, Inc. prides itself on 2-4 weekturnaround time on orders when existing moldsare available, and 4-9 week turnaround when newmolds are needed. Display the actual implants youuse on a daily basis right in your clinic’s lobby or on your office desk. Westrongly encourage you to explore the advantages of saving office visit timethrough the use of a ClearCast Bone model.Our website contains a full list of implants for which we already havemolds, organized by orthopaedic manufacturer. Let our ClearCast Bonesclear your way to valuable business.CDC Design, Inc.Tel: 512-846-2310www.cdcdesigninc.comAAOS Booth 1302 Enquiry No 60January/February 2007 • Orthopaedic Product News 55

PRODUCT FEATURESChartLogic, Inc. develops ElectronicMedical RecordChartLogic, Inc. is the leading developer of electronic medical officesolutions, offering complete front-to-back medical office automation toorthopaedic surgeons. The ChartLogic electronic medical record(EMR) provides a complete patient chart electronically, eliminating theneed for paper charts. Using voice recognition technology, ChartLogicenables the physician to easily create compliant and complete patientdocumentation in less time and at lower costs. With thousands of usersacross the United States, ChartLogic has become the leading voice-activatedelectronic medical record available today.PatientLogic and BillingLogic complement the ChartLogicEMR. PatientLogic is an intuitive software suite of three tools thataddress commonly treated musculoskeletal conditions. Video, brochures,illustration/images and 3D animations create a one-button solution forphysicians to comprehensively educate patients.BillingLogic is the leadingpractice managementsolution. From billing toappointment scheduling andreimbursement management,BillingLogic automates eachaspect of the practice.ChartLogic, Inc.Tel: 800-686-9651www.chartlogic.comAAOS Booth 5824Enquiry No 61Buechel-Pappas AcetabularComponent SystemThe Buechel-Pappas Acetabular Component System from Endotec,Inc. is a fixed anatomical cup configuration that approximates the shapeof the acetabulum and is recessed within its bony borders to minimizeimpingement and maximize range of motion. A spherical interface surfacewith BioCoat ® and UltraCoat ® finish for superior biological fixationand biocompatibility requires minimal bone resection and providesease of acetabular preparation and intraoperative position adjustment.Inferior flares increase head coverage and flexion stability.Cups are available with no or five spherically seated holes forscrew fixation to provide optimal intraoperative options for primaryand revision cases.The Buechel-Pappas Acetabular Component System is part of theBuechel-Pappas Total Hip System, providing prostheses for primary,revision and resurfacing surgeries.BioCoat ® and UltraCoat ® aretrademarks of Endotec, Inc. andThe B-P Trust.Endotec, Inc.Tel: 973-762-6100www.endotec.comAAOS Booth 4322Enquiry No 63OsteoMed M3-X Screw SystemThe M3-X TM ExtremityFixation System is a rigidfixation system for smallbone orthopaedicosteotomies and fractures.It offers modular instrumentationand a superiorscrew and plating systemin one compact tray. M3-X features four sizes oftrue lag screws used forthe fixation of the handand foot. OsteoMed’s lagscrew design eliminatesthe need to over-drill theproximal segment, whilethe low profile head minimizes countersinking. This system features1.2mm, 2.0mm, 2.4mm and 3.0mm titanium lag screws; 1.2mm, 2.0mmand 2.4mm fully threaded titanium screws and 1.2mm, 2.0mm and 2.4mmtitanium plates. OsteoMed’s M3-X system is ideal for hand fracture fixationand many other extremity fixation procedures.OsteoMedTel: 800-456-7779www.osteomedcorp.comAAOS Booth 3029Enquiry No 64The WoodpeckerIMT-USA, LLC introducesthe Woodpecker ® , Total HipBroaching system. It is aunique product that hasbeen earning the attentionand acclaim of OrthopaedicSurgeons worldwide since1992. The Woodpecker easilyadapts to standard industrybroaches. Its gentle,rapid linear motion forimproved modeling on theProximal Femur createsintimate contact between the bone and press fit implants. Furthermore, theWoodpecker can reduce the risk of fissuring the bone and reduces operatorfatigue and the amount of time necessary to perform Total HipArthroplasty (THA) when compared with traditional procedures. Alongwith THA you can also use the Woodpecker for MIS and extraction ofintramedullary nails. The Woodpecker is available with a complete line ofCompatible Broach Adapters, Sterilization Tray, Extended Warranty programand leasing options. For Sales and Service, please contact:IMT – USA, LLCTel: 651-493-9634www.imt-medicalusa.comAAOS Booth 0900Enquiry No 6256 Orthopaedic Product News • January/February 2007

PRODUCT FEATURESIMT’s MYKRES Spinal SystemInnovation Medical Technologies,Inc. (IMT) was founded with the ideaof bringing a new approach to thedelivery of spinal products in anincreasingly competitive medicalmarketplace. Key principles includebeing Physician-Centric, Science-Based and University-Driven. IMT’sBoard of Directors is comprised offellowship trained spinal surgeons.The management team of IMTconsists of seasoned orthopaedicimplant executives, experienced withinthe orthopaedic space. The knowledgebase and skills of these individualsallow IMT to manage the complicatedand competitive needs of agrowing spinal company.IMT’s MYKRES Spinal Systemwas developed by world-renownedspinal physicians and offers a full lineof implants (screws and hooks) forvarious spinal surgical cases includinganterior, low back, trauma,deformity and scoliosis. MYKRES system pedicle screws are one of themost low-volume and low-profile systems available and come in two rodsizes.Innovation Medical Technologies, Inc.Tel: 877-675-1492,www.innovationmedical.com.AAOS Booth 2848Enquiry No 65Accell TBM TMAccell TBM TM (Total Bone Matrix) is a malleable allograft packed with naturalhuman bone morphogenic proteins (BMPs) for consistent and predictablebone formation. It is manufactured using IsoTis’Accell ® technology,which boosts the power of demineralized bone matrix (DBM) with aproprietary process that yields significantly more BMPs than industry-standardprocessing. Each lot of Accell DBM is validated by in vitro assay toensure osteoinductivity and bone forming potential. Accell products are alsoe-beam sterilized,using a processproven to maintainthe osteoinductivityof bone growth factors.IsoTisTel: 800-550-7155or 949-595-8710www.isotis.comAAOS Booth 3226Enquiry No 67DorsoTrain – New Support forOsteoporosisStability can be so simple!Bauerfeind introduces the latestfor osteoporosis protection:the DorsoTrain activesupport to aid in the straighteningand support of the thoracicspine. Relief is providedthrough the combination of apre-contoured, semi-rigid posteriorpanel and inelasticshoulder straps incorporatedinto an attractive, soft bodysuit.Your patients willabsolutely love it, not onlybecause it makes them feelgood, but because it looksgood, too! Bauerfeind’sDorsoTrain does not look likean orthosis. It is a comfortablebodysuit that can be easily worn under clothing, thus assuring patient compliance.The dynamic pull-straps provide an active support and stabilization tothe surrounding back muscles and ligaments. Bauerfeind’s DorsoTrain isused for post-kyphoplasty procedures as well as for mild osteoporosis correction.Patients already taking bone growth medications are also excellentcandidates for the DorsoTrain. This product is not recommended for postoperativetreatment for fractures.BauerfeindTel: 800-423-3405, ext. 6 (Customer Service)www.bauerfeindusa.comAAOS Booth 3026Enquiry No 66BiPass Suture PunchThe BiPass Suture Punch from Biomet Sports Medicine is a singlestepinstrument that passes and retrieves suture simultaneously—noadditional shuttle steps are required. A Nitinol pusher passes the suturethrough the tissue where it is captured by a unique “trap door,” reducingsuture management steps. The BiPass Suture Punch allows for a large tissuebite (up to 16mm) and can beused for arthroscopic or miniopenshoulder repair withoutpinching tissue. The ergonomic,low profile design provides comfortand ease of use.Biomet Sports Medicine, Inc.Tel: 800-348-9500, ext. 1501www.biometsportsmedicine.comAAOS Booth 1732Enquiry No 68January/February 2007 • Orthopaedic Product News 57

PRODUCT FEATURESAptic Superbones Introduces NewShoulder Repair Training ModelAptic Superbones, maker oforthopaedic training and workshopmodels, introduces a newtissue-realistic total shoulderrepair training model. Thereplaceable total shoulderarthroscopy/arthroplasty (T.S.A.)model is suitable for training anddemonstration of botharthroscopy and arthroplasty surgicaltechniques.The T.S.A. model includes aglenoid on a vice block and left humerus in a joint capsule, assembledwith realistic cast ligaments and connecting tissue. The model isdesigned to provide surgeons with an educational tool for practicingadvanced shoulder repair techniques. In addition to its use in surgeonworkshops and resident training, the T.S.A. may be used by sales professionalsand device manufacturers in the shoulder repair market, and iseasily held in place by a vice or with the optional T.S.A. torso.The T.S.A. model complements Aptic’s arthroscopic shoulder surgerysimulation model, the S.A.M. In addition to these shoulder repair models,Aptic also offers arthroscopy practice models for hips and knees.Aptic Superbones designs and manufactures a complete line ofanatomical models and workshop bones for use in both educational andproduct sales venues.Aptic SuperbonesTel: 1-866-265-BONE (2663)www.apticsuperbones.comAAOS Booth 0213 Enquiry No 69Biomet Sports Medicine Total ToeSystemThe Biomet Sports Medicine Total Toe System offers a new generationin first metatarsophalangeal joint reconstruction. Its design is anatomicallycorrect and addresses the surgeon’s needs by offering fourmetatarsal components, four all-poly and four metal-backed phalangealcomponents. The Total Toe System is modular so that any sizemetatarsal component may be used with any size phalangeal component.Sesamoid articulation on the plantar condyle allows for fullweight bearing and normal joint articulation of the joint. These factorscontribute to the clinical success of the Biomet Sports Medicine ® TotalToe System.This information is intended for BiometSports Medicine sales representatives andsurgeons only and is not for patient distribution.Biomet Sports Medicine, Inc.Tel: 800-348-9500, ext. 1501www.biometsportsmedicine.comAAOS Booth 1732Enquiry No 71Lose your Internet Connection toyour EMR?No problem with Medcere’s SmartClient Technology. When criticalpatient information is entered into anElectronic Medical Record (EMR)there is nothing more stressful thanlosing the browser-based Internetconnection and consequently nothaving access to your data, or thepatient data that you were entering.Instead of re-entering the data,wouldn’t you rather simply practicemedicine and treat your patients likeyou were trained to do?Utilizing leading edge MicrosoftSmart Client technology, Medcerehas developed an EMR with a Disconnected Data Model that helps eliminatethat stress related to losing your Internet connection. With SmartClient technology, you can access data even when not connected to theInternet or with the network that hosts the Web service. Because most ofthe application logic sits on the local computer, our Smart Client can functioneven while offline. This capability sets our EMR apart from browserbasedapplications, and is a key requirement for our physicians who liketo work on the road, at home or anywhere in the world.Medcere has built an EMR platform with many advantages for today’sbusy orthopaedic surgeon, the disconnected model being only one ofthem. Our Smart Client EMR is Agile, Adaptive and Intelligent - positioningMedcere to be your EMR provider for 21 st century medicine.MedcereTel: 888-573-1233, www.medcere.comAAOS Booth 5851 Enquiry No 70Buechel-Pappas Hip ReplacementSystemThe Buehel-Pappas Hip system from Endotecconsists of standard and modular components thatcan answer many custom needs with “off the-shelf”inventory. The femoral components are designed forbiological fixation, although cemented femoralstems are also available. The acetabular cups aremetal-backed with BioCoat ® on the fixation surfaces.All metal parts are made of ceramic coatedUltraCoat ® surgical grade titanium alloy. Femoralheads in Co-Cr alloy and ceramic coated UltraCoatsurgical grade titanium alloy are available in 28 and 32mm diameters.The femoral stems use a neck angle of 32° rather than the conventional45° to better align the neck with the forces in the hip. Thisimproved alignment allows the use of a smaller neck increasing therange of motion of the hip. The anatomically shaped acetabular cupsremove regions with unneeded material, further improving motion.Both improvements reduce impingement and the risk of dislocation.BioCoat ® and UltraCoat ® are trademarks of Endotec Inc and The B-P Trust.Endotec Inc.Tel: 973-762-6100, www.endotec.comAAOS Booth 4322 Enquiry No 7258 Orthopaedic Product News • January/February 2007

PRODUCT FEATURESToggleLoc Femoral Fixation DeviceThe ToggleLoc Femoral Fixation Device from Biomet Sports Medicine,Inc. was created to provide a method for strong, stiff fixation for ACLreconstruction using a simple and straight-forward surgical technique.Designed specifically for soft tissue grafts, the ToggleLoc Femoral FixationDevice captures the cortical bone of the femur, which is 50 times strongerthan cancellous bone. 1 The ToggleLoc Femoral Fixation Device is preloadedwith MaxBraid Passing Suture and packaged on a unique card,which allows simple loading of the soft tissue graft. The surgeon-friendlysurgical technique requires only a depth gauge and a 4.5mm drill bit to preparethe tunnel for implanting the ToggleLoc Femoral Fixation Device.1. Amis AA, et al.; “The strength of artificial ligament anchorages: A comparative experimentalstudy.” Journal of Bone andJoint Surgery [Br], 70(3): 397–403,1998.This information is intended for BiometSports Medicine sales representatives andsurgeons only and is not for patient distribution.Biomet Sports Medicine, Inc.Tel: 800-348-9500, ext. 1501www.biometsportsmedicine.comAAOS Booth 1732Enquiry No 73SportMesh Soft TissueReinforcementSportMesh Soft TissueReinforcement is a partiallyresorbable, synthetic patch that isused for soft tissue reinforcementfor the supraspinatus (rotator cuff)tendon in conjunction withsutures and/or anchors. It isdesigned to act as a scaffold for atorn tendon that is too fragile tomaintain a strong connection withthe bone on its own. The pliable,knitted Artelon® material is abiocompatible degradable poly(urethane urea) that providesshort and long term reinforcement while acting as a partially degradablescaffold that is incorporated into the patient’s own tissue. 1 Excellent biocompatibilityhas been demonstrated in soft tissue and bone with over eight yearsclinical experience. 11. Nilsson A, Liljensten E, Bergstrom C, Sollerman C; “Results From a Degradable TMCJoint Spacer (Artelon) Compared with Tendon Arthroplasty.” The Journal of Hand Surgery,380 – 389. 2005.This information is intended for Biomet Sports Medicine sales representatives and surgeonsonly and is not for patient distribution.Biomet Sports MedicineTel: 800-348-9500, ext. 1501www.biometsportsmedicine.comAAOS Booth 1732 Enquiry No 75SuperCable TM Iso-Elastic TM PolymerCerclage SystemThis revolutionary polymerbasedcerclage system is designedto solve many of the inherentproblems of traditional monofilamentwire and cabling systems.Features of the system include:• Fatigue strength far superiorto both wire and cables,thereby reducing complicationsdue to breakage.• Polymer cable, which eliminatescable-generated metalparticle debris that has beenshown to greatly increase wear in adjacent total joints.• Iso-Elastic TM property of the cable provides long-term dynamic compressiveloading across bone fragments, to offer the possibility for betterhealing and increased construct strength.• SuperCables can be easily retightened after locking to adjust cabletension, especially when multiple cables are applied, saving time andreducing the number of cables required.• Cables are easy and quick to apply and tension.• No metal cable contacting metallic implants.• No sharp cable ends to irritate patient tissue.• No sharp cable ends to cut surgeon’s gloves.Kinamed, Inc.Tel: 805-384-2748, www.kinamed.comVisit Kinamed at AAOS 2007, San Diego, Booth 2824Enquiry No 74Endotec CustomsEndotec Inc., by virtue of the extensive, long-termexperience of its principals in the design of hip,knee, shoulder, ankle and finger replacements,can provide exceptional expertise in customimplant design and manufacture. Such expertiseis simply not available elsewhere. Endotec canapply this expertise to the design of customs totreat a wide variety of orthopaedic problems,particularly those in joint replacement revision.Endotec has developed successful customdevices, including an expandable femoral bonereplacement in a ten year-old youth, scapular andpartial pelvic and limb replacements. Custom revisionknee, hip and ankle devices are a specialty. Endotec has developed a successfulcustom device for the revision of the “Agility” ankle.All metallic components are available with or without BioCoat ® on theirfixation surfaces, allowing a choice of biological or cemented fixation.Further, all metal parts are made of ceramic coated UltraCoat ® surgical gradetitanium alloy for improved biocompatibility and wear resistance.BioCoat ® and UltraCoat ® are trademarks of Endotec Inc and The B-P Trust.Endotec Inc.Tel: 973-762-6100, www.endotec.comAAOS Booth 4322 Enquiry No 76January/February 2007 • Orthopaedic Product News 59

PRODUCT FEATURESS4 Brace (Spine and ScapulaStabilizing System)Alignmed introduces the functionaland dynamic S4 Brace(Spine and Scapula StabilizingSystem) for improving shoulderand spine function by optimizingscapular position,spinal alignment and proprioceptiveretraining. The S4 isperfect for pre- and post-operativerehabilitation, and complementsphysical therapy.This dynamic retraining deviceis suitable for various types ofpatients: school students whospend time on the computer,people who sit at a desk for along period of time, a surgeonin surgery, patients with back pain, patients with upper body weakness,athletes and many more.AlignMedTel: 800-916-2544, www.alignmed.comAAOS Booth 0339Enquiry No 77TAMARACK Anterior ThoracolumbarPlating SystemThe Tamarack AnteriorThoracolumbar PlatingSystem is lower profile thandual rod constructs. The windowsenable graft site and endplate visualization, while thescrew locking mechanismhelps prevent screw backout.The low profile designdecreases soft tissue irritation.The Tamarack plate facilitatescompression up to 6 mm, andthe triangulation of the boltand screw design strengthensthe construct. The instrumentationis simple and effective,which streamlines the surgical procedure.Tamarack Anterior Thoracolumbar Plating System is another precision-craftedproduct from Alphatec Spine Inc. With an unsurpassedcommitment to physician driven collaboration, Alphatec delivers stateof the art technology into the hands of surgeons – helping to improvepatients’ lives.Alphatec Spine Inc.Tel: 800-922-1356www.alphatecspine.comAAOS Booth 2432Enquiry No 79Deltaloc ® Reveal Anterior CervicalPlating SystemThe Deltaloc ® Reveal AnteriorCervical Plating System is anotherprecision-crafted product fromAlphatec Spine Inc. With an unsurpassedcommitment to physician drivencollaboration, Alphatec designs,manufactures and delivers state of theart technology into the hands of surgeons– helping to improve patients’lives.With a low profile, normal cervicalanatomical contour, the Deltaloc RevealCervical Plate incorporates a large windowthat enables graft site visualizationand a simple one-step locking mechanismthat helps insure a secure application. The system’s self-drilling, selftapping,fixed and variable angle screws provide multiple application alternatives.Additionally, the system features user-friendly, color-coded instrumentation,further streamlining the surgical procedure.Alphatec Spine Inc.Tel: 800-922-1356www.alphatecspine.comAAOS Booth 2432Enquiry No 78BioPro ® Modular Thumb ImplantThe BioPro ® Modular Thumb Implant is a hemispherical interpositionaldevice for treatment of Osteoarthritis and Post-traumatic Arthritis. It is usedto replace the symptomatic joint between the first metacarpal and the trapezium.Interpositional arthroplasty offers pain relief and has the benefit ofmaintaining range of motion and a firm foundation for grip and pinchstrength. The modular design of the BioPro implant minimizes the frequentlyoccurring complications that have hindered other arthroplasties such asdislocation, material failure and invasive soft tissue reconstructions.The medial offset head and varus angle of the implant avoid dislocation,plus modularity allows for reproduction of soft tissue tension. Theimplant is manufactured from cobalt chrome, which has been proven tohave excellent biocompatibility. Additionally, the minimally invasiveoperation does not require any soft tissue releases and/or sling proceduresto maintain functionality. The BioPro Modular Thumb Implant also offerssimple instrumentation, allowing for easily reproducible results.BioProTel: 800-252-7707www.bioproimplants.comAAOS Booth 2733Enquiry No 8060 Orthopaedic Product News • January/February 2007

PRODUCT FEATURESZimmer ® NexGen ® GenderSolutions NexGen ® Female CR-Flex/LPS-Flex Femoral KneeComponentsThe NexGen Gender SolutionsHigh-Flex femoral knee componentswere developed to addressthe specific shape differences thatare typical of female femoralanatomy. Scientific research clearlyindicates that there are differencesbetween the typical female and male femoral anatomies. Until now,the orthopaedic industry has provided femoral components that are basedon an average of female and male femoral anatomy. The NexGen GenderSolutions High-Flex femoral components were designed to match the specificM/L-A/P aspect ratio typical of the female anatomy. This is an importantadvancement for the treatment of the under-served female total kneearthroplasty (TKA) patient population which accounts for nearly twothirdsof the TKA population.These implants are designed to accommodate safe high flexion, up to155°, for the lifestyle needs of the global patient population. The GenderSolutions High-Flex Knee is based on the clinical success of our NexGenHigh-Flex Knees and Zimmer’s 30-plus years of clinical excellence in totalknee replacement.The Gender Solutions High-Flex femoral knee components are availablein Posterior Stabilized (PS) and Cruciate Retaining (CR) versions.PROfx ® hana TM TableThe explosive growth of the Anterior Approach to total hip arthroplasty led toa strong need for a new table that serves two of the fastest growing orthopaedicprocedures today: the single incision Anterior Approach to Hip Arthroplastyand small incision Total Knee Arthroplasty.That new table is hana (Hip and Knee Arthroplasty), which now offersspecific features of the PROfx ® in a compact, technologically superior tabledesign. Since its introduction, the hana table system has also become the platformof choice for Hip Arthroscopy and the resurgence of Hip Resurfacing.With its unique capability to position the leg, hana enables the surgeon toreplace the hip through a single incision, Anterior Approach without detachmentof the muscle from the pelvis or femur. The Table allows hyperextension,abduction, adduction and external rotation of the hip for femoral componentplacement – a positioning option not possible with conventional tables.OSI Table systems are the largest instruments in the OR, Designed byOrthopaedic Surgeons for Hip and Knee Orthopedic Surgeons around the world.OSI provides a comprehensive range of specialty composite operatingtable systems, pressure management and positioning devices for Spinal,Orthopaedic and Vascular Surgery where optimum patient positioning or interoperativeimaging is desirable.Zimmer, Inc.Tel: 574-267-6131, www.zimmer.comAAOS Booth 2400 and 6312 Enquiry No 81Buechel- Pappas TricompartmentalKnee SystemThe Buehel-Pappas Tricompartmental Knee system consists of primaryand modular femoral and tibial components designed to treat a wide rangeof pathologies, from primary to revision. All metallic components areavailable with or without BioCoat ® on their fixation surfaces, allowing achoice of biological or cemented fixation. Further, all metallic componentsare made of ceramic coated UltraCoat ® surgical grade titanium alloythat improves wear resistance and eliminates the nickel sensitivity andother biocompatibility problems of Co-Cr alloy knees.The Buechel-Pappas Knee is the third-generation refinement of theNew Jersey Knee. The original design was licensed to DePuyOrthopaedics as the LCS. The current design is a significant improvementover the earlier generations in that it has superiorcongruity, further improving the wearcharacteristics of the clinically proven earlierdesigns. An additional refinement is use of astop on the rotating tibial bearing motion thatis sufficient to prevent bearing subluxationwithout inhibiting normal axial rotation.BioCoat ® and UltraCoat ® are trademarks of EndotecInc and The B-P Trust.Endotec Inc. Tel: 973-762-6100www.endotec.comEnquiry No 83Orthopedic Systems, Inc.Tel: 800-777-4674www.osiosi.comAAOS Booths 1912 and 1918Enquiry No 82To see your productslisted within the ProductNewsand Product Featuresectionsemail your information to usopn@orthoworld.comJanuary/February 2007 • Orthopaedic Product News 61

PRODUCT FEATURESZimmer ® Trabecular Metal PrimaryHip ProsthesisThe Zimmer ® Trabecular Metal PrimaryHip Prosthesis brings the distinctive propertiesand clinically proven benefits ofTrabecular Metal technology to a bone conservingand proximal loading stem design. The combinationof a 14-degree proximal taper, 23.5-degree neckresection angle and Zimmer MIS Technologyfriendly instruments are designed to result in optimalinitial stability, enhanced, long-term biological fixationand efficient proximal load transfer.The stem is available in both Standard (sizes 9-18)and Extended (sizes 11-18) offsets. It combines aTivanium ® Alloy substrate that provides excellent biocompatibilityand strength without excessive stiffness,along with a proprietary, diffusion-bonded, proximalTrabecular Metal pad. A reduced neck geometry belowthe 12/14 Taper helps increase range of motion.Zimmer, Inc.Tel: 574-267-6131www.zimmer.comAAOS Booth 2400Enquiry No 84Zimmer ® Compact Vacuum CementMixing SystemThe Zimmer Compact Vacuum Cement MixingSystem provides fast, hassle-free mixing of highviscosity bone cements. Its self-contained mixingelement thoroughly mixes high viscositycement and eliminates the added mess and inconvenienceof removing the mixing element prior tocement injection. The wide-mouth funnel makesloading of ingredients a clean and simple process.The system comes with a vacuum pump adapterwhich allows for connection tovarious vacuum sources andthe vacuum tube is equippedwith a visual vacuum indicator.The ZimmerCompact System is adisposable, sterile devicethat is optimally packagedfor efficient storage and minimalwaste. The mixing cartridge isdesigned to easily load into thePower-Flo ® Bone Cement Injector.ZimmerTel: 800-321-5533www.zimmer.comAAOS Booth 2400 and 6312Enquiry No 86PALACOS ® LV and PALACOS LV+GBone CementZimmer, a leader in orthopaedics, is cementing confidence with a low viscosityversion of PALACOS® Bone Cement available with or withoutGentamicin.PALACOS LV and PALACOS LV+G Bone Cements are based on thesame time-tested raw materials of PALACOS R and PLACOS R+G BoneCements, with the same unique green color. Because of a lower viscosity,PALACOS LV and LV+G are easy to eject from cartridge mixing systemsand from long, narrow nozzles used in some orthopaedic procedures.Other key features include excellent bending strength characteristics, highvisualization and a clinically proven antibiotic with a broad spectrum ofkill. Cementing with confidence starts with PALACOS Bone Cement –the ideal choice for orthopaedics.PALACOS is a trademark ofHeraeus Kulzer GmbH.Under license from HeraeusKulzer GmbH, Hanau,Germany.ZimmerTel: 800-321-5533www.zimmer.comAAOS Booth 2400Enquiry No 85The Achillon ® SystemIntegra Newdeal offers a minimallyinvasive method to treat acuteAchilles tendon ruptures. TheAchillon ® System allows directvisual control and percutaneous introductionof the sutures. The Achillonframe promotes precise order and introductionof the sutures. The adjustmentscrew facilitates individualadaptation to the tendon. The Achillon iswithdrawn when the sutures have beenpassed through the tendon, and from anextracutaneous position the sutures become subperitendinous. TheAchilles tendon is the only site of tissue attachment for the suture. Thesurrounding soft tissue and the tendon itself are treated carefully throughoutthe procedure to avoid local trauma. This minimally invasive procedurepromotes both faster patient recovery and the cosmetic benefit of asmaller scar.The Achillon ® System includes the Achillon instrument, one needledriver, and two surgical needles of 1.6mm diameter.Integra LifeSciences Corporation.Tel: 800-654-2873www.integra-ls.comAAOS Booth 2912Enquiry No 8762 Orthopaedic Product News • January/February 2007

PRODUCT FEATURESKineMatch TM Patello-FemoralReplacementIndicated for end-stage isolated patellofemoraldisease*Simple and Efficient. A CT-basedcustom fit provides precise conformanceto the patient’s trochlear groove, eliminatingthe need for bone resection andthus simplifying and speeding implantationof the prosthesis. A matching customdrill guide is provided to efficientlydetermine position and create peg-holes.The surgeon’s attention can then befocused on providing for optimum patellartracking.Clinically Proven.• 25 implants, mean follow-up 73 months• Results: 18 Excellent, 7 Good• 100% survivorship, no additional surgeries. 1In addition to eliminating bone resection and preserving bone stock, theCT custom fit also allows for restoration of normal kinematics whilereducing the potential for soft-tissue impingement, patellar catching andother fit-related problems associated with off-the-shelf devices.NaviPro Image- Free ® ShoulderNavigationComputer-assisted technologies can improve implant alignment in hip andknee arthroplasty. Like hip and knee arthroplasty, successful shoulder arthroplastydepends primarily on proper technique, because incorrect glenoid andhumeral component orientation can lead to premature wear, loosening, andsuboptimal function. The NaviPro system trackers are minimally invasive andcan be safely and securely attached to the humerus and scapula, without damageto bony or neurovascular structures. Because no established guidelinesexist in the literature for placement and orientation of shoulder implant components,this system provides the shoulder surgeon, for the first time, with asafe and effective intra-operative tool for accurately performing shoulderarthroplasty and documenting its results.Features and Benefits of the NaviPro Shoulder System:• 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 outcomes• Passive Tracking - No additional wires or cords in the operative field• Reliable - Patented Tracker-Check* technology ensures reliability1. Sisto and Sarin (2006) Custom Patellofemoral Arthroplasty of the Knee. J. ofBone and Joint Surgery. 88-A(7): 1475-80.Kinamed, Inc.Tel: 805-384-2748, www.kinamed.comAAOS Booth 2824 Enquiry No 88Xpanse Bone InsertThe Xpanse Bone Insert is a unique blend of demineralized cortical andcancellous allograft, which is designed to expand to the bony contours of acavity. Once rehydrated in vivo, the Xpanse Bone Insert undergoes significantvolume expansion ensuring endplate contact and providing a matrix forcellular penetration to promote bone healing. The Xpanse Bone Insert usesthe demineralized fiber technology found in Grafton ® DBM products anddemineralized cancellous chips to create a healthy conductive matrix for theincorporation of new bone.Progressive bone formation, over a period of five months, has beendemonstrated in an intravertebral sheep model. Xpanse Bone Inserts placed incylindrical PEEK insert holders were implanted with a 5mm gap between thebone insert and superior surface of the defect. At one month, expansion is evidentand bone formation adjacent to host bone is visible. At five months,clearly defined trabeculae span the defect indicating advanced remodeling.Xpanse can be used in bone grafting procedures as an individual graft orin combination with autograft or other forms of allograft bone. Xpanse BoneInserts are designed to fit within Osteotech’sGraftcage ® Spacers, but can be sized in the OR tofit in and around other spinal fusion devices.Osteotech, Inc.Tel: 800-537-9842, www.osteotech.comAAOS Booth 3412 Enquiry No 89Kinamed, Inc.Tel: 805-384-2748www.kinamed.comVisit Kinamed at AAOS 2007, San Diego, Booth 2824Enquiry No 90January/February 2007 • Orthopaedic Product News 63

Enquiry No 24

INTELLECTUAL PROPERTY UPDATECollaborative Entrepreneurship:A New Model for Surgeons toBring Ideas to MarketAuthor: Scott CapdevielleIn its 2006 Annual Global CEO Study, IBM highlighted a fundamentalshift in direction in the creation of new technologies. Rather than beingdriven from within a company’s traditional R&D departments, theseCEOs expect most innovation to occur through collaboration withexternal partners. Business partners and customers were cited as topsources of innovative ideas, while internal research and developmentdepartments fell much lower on the list. 1The above paragraph probably comes as no surprise to any orthopaedicsurgeon. Many new products being introduced to the orthopaedic marketare first conceived of by an orthopaedic surgeon. Triggered by shortcomingsin existing procedures, devices or tools, a surgeon will think aboutpotential improvements until an innovative idea for a new technology,process or product is formed to address the limitation(s). Once the ideabecomes more tangible, the surgeon may decide that it is worth pursuing.At this point, the process begins to become more complicated.The two most common paths that surgeons follow are to approach anexisting medical device company or to assemble a small start-up company.In the first scenario, the surgeon will probably approach a company withwhom he already has a working relationship, with a goal of partnering tobring the product to market. In the second scenario, the surgeon will needto pull together a strong management team, raise venture capital and try tobring the product to market through independent channels.Each approach has advantages and disadvantages. Going to anexisting medical device company, especially a larger one, becomes atricky dance for both the surgeon inventor and the company representatives.For a surgeon who believes he has an idea that could be worth asignificant amount of money, the greatest concern rests with theappropriation of that idea without fair compensation. In most cases, thesurgeon has a very good relationship with the company; however, it isreality that the companies that manufacture and distribute these productsare very large, well funded and have teams of attorneys designed tonegotiate on the company’s behalf. The surgeon inventor does not. Onthe other hand, working with a medical device company enables asurgeon to tap into an existing infrastructure of engineers, testingprotocols, marketing resources and distribution channels.Conversely, the company is concerned about maintaining a goodworking relationship with the surgeon, who is more than likely a goodcustomer (which is why he approached that particular company), thus,they do not want to damage that relationship in any way. In addition,most medical device companies are presented with so many differentinnovations (both from internal and external sources) that there is a goodprobability that they are already working on something similar or competitiveto the innovation in question – which can lead to potential conflicts.Starting a small company to develop, test, manufacture and ultimatelymarket and sell a new device is an option gaining popularity, especially inthe spine market. This has the advantage of not relinquishing control ofthe innovation to a large company, but instead becoming involved in asmall one. The costs, however, are very real. This is an extremely timeconsumingprocess and one that is unfamiliar to most surgeons. Most whochoose this option make sacrifices to their practices in order to pursue thispath. The process of assembling a strong management team, raisingventure capital and leading a design and testing team is in itself a full timejob. At the end, there is a very good probability that the venture will fail.The New Alternative: Collaborative EntrepreneurshipA third alternative is emerging and is already demonstrating success inthe orthopaedic technology markets. Taken from the theories ofCollaborative Entrepreneurship, a book written by the former Dean of theUC Berkeley Haas School of Business and his colleagues, this newapproach emphasizes a team of collaborators developing and protectingideas by turning them into patents. The goals for this process are to enableeach team member to participate in the process without giving up theirday job; provide each member of the team with equity in the innovation;and reduce the out of pocket expense and time commitment required. Theoutcome of this process is collective ownership of a patent that can thenbe shared, sold or licensed in a uniform and predictable way.Step 1: Setting Down the Principles of BehaviorThe first step, and one of the most important, is to agree upon principlesof behavior. While much has been written on the topic of collaboration,there are a few key behaviors that must be practiced for this processto be successful. Some of these are:• Compensation must be fair for contributions made.• Roles and deliverables must be well defined.• Consensus should drive decision making.Indeed, the first act of collaborative behavior is the identification ofnecessary team members (designers, engineers, legal, etc.) and aproposal for the equity split for each member of the team.Step 2: Building the TeamWhen selecting a team, the goals of the collaborative entrepreneurshipprocess must be kept in mind. Every team member should beactively employed in the business of design (not relying on this projectfor income), be skilled and experienced in their respective discipline(time is of the essence, so minimal learning curve is essential) and be fairminded (equity is going to be split between the team members, so eachparticipant should be committed to a fair split for all members).continued on page 6866 Orthopaedic Product News • January/February 2007

Enquiry No 25

INTELLECTUAL PROPERTY UPDATEcontinued from page 66Once a pool of candidates is identified, interviews are held todetermine fit for the particular innovation. This step is critical as collaborationis built on a foundation of trust established between teammembers. Conflicts – including personality conflicts – hinder the collaborativeprocess. Identifying potential sources of conflict through theinterview process is paramount.Step 3: Establishing Equity PercentagesNow that the team is identified, it is time to propose the equitypercentages that are allocated to each team member. This is an importantpart of the process, but equally so is the acknowledgement that theoverriding goal of splitting the equity is that each team member receivesa fair split based on contributions. In addition, while it is necessary toestablish a split upfront, it may be necessary to adjust the percentagesdown the line if it is determined that one member did more work (or less)than originally expected. This process is called “true-ing up.”Step 4: Vesting EquityOnce the team is signed up, it is time to begin the actual work. Whencreating a patent, the standard process involves writing specificationsand requirements (typically led by the inventor), patent planning andwriting (patent attorney), conceptual and preliminary design work(engineer) and general project management.Although a percentage of equity was previously allocated to each teammember, equity is not actually granted until the work product is delivered,accepted and assigned to the organization. This is a process called“vesting.” It is important to vest the equity to ensure that each teammember is fairly compensated for work contributed; without contributions(work product), there is no need to compensate. This is a fairly commonpractice in high tech companies and the process is very well defined.Other companies such as Nine Sigma and Innocentive have developedinnovation networks that put together “buyers/seekers” with “solutionproviders” in an open marketplace to collaborate on new products andtechnologies.ConclusionWhile there are many ways to develop an idea as a practicing surgeon,in some cases, the traditional avenues may be less than ideal. Fromuncertainty regarding ownership rights and control, to significant timecommitments in a risky venture, each approach has challenges.Collaborative Entrepreneurialship appears to offer solutions that address theshortcomings of the conventional paths identified earlier. The end result isa solution that gives the entrepreneurial surgeon more time to innovate,greater control over his intellectual property and a larger share of the equity.1. Global CEO Study, IBM, Expanding the Innovation Horizon, 2006.Scott Capdevielle is Chief Executive Officer of Syndicom, Inc., a softwareand services company that develops a Collaborative Innovation Network(CIN) software platform. Syndicom is building CINs for the orthopaedicindustry, helping those community members produce original research,copyrights and patents. He can be reached at scott@syndicom.com or970-385-4250.Enquiry No 91Step 5: Submitting the PatentThe large portion of the project’s first phase is completed when thepatent is submitted; however, it is not over. There may be significantwork required in answering questions from the patent examiner’s office.This can take months, even years in extreme cases, so it is important toreserve some portion of the vesting until the patent is granted.Case StudyOne such firm that specializes in the “CollaborativeEntrepreneurship” process is Syndicom, Inc. The company recentlybegan working with surgeons to help them use CollaborativeEntrepreneurship to turn their ideas into patents. They have worked onspinal implants, orthopaedic instruments and other inventions related toorthopaedic surgery.In February 2006, an orthopaedic trauma surgeon began a discussionwith the company about an idea that he had been trying to develop forthree years. Initially, the surgeon had approached his sales representative,who put him in touch with an engineer inside the rep’s company. The firstthing the surgeon had to agree to was signing a non-compete agreementfor three years. Because he had no reason to work with anyone else onthe idea, he signed the agreement. The process was slow and work wassporadic. After approximately 12 months, the surgeon was informed thatthis company was not interested in pursuing the development workbecause they were unable to engineer a certain aspect of the invention.Within three months of their first discussion with the surgeon,Syndicom helped the surgeon build a team, worked on several differentapproaches to the invention and submitted the patent for a total out ofpocket expense of $757. That surgeon has recently signed up to develophis third patent.Enquiry No 2668 Orthopaedic Product News • January/February 2007

Enquiry No 27

Enquiry No 28

SPECIAL FEATUREPhysicianOwned Hospitals:The State of the DebateAuthors: David W. Hilgers; Kimble D. RossThere’s a maxim about politics—never assign to coincidence what canbe fully explained by a conspiracy. This should be the defining paradigmin analyzing the on-again, off-again public policy debate over physicianownedhospitals. Clinically speaking, doctors should not feel paranoid.The large commercial hospital systems are after them, sometimes inconcert with their strange bedfellow ally, the big commercial managedcare plans. This is where the laws of economics meet the laws of thehealth care jungle, and size matters. The large hospital systems areprotecting their franchise by asking the government, state or Federal, toremove a significant competitive threat to their growing lock on local andregional markets. This market control was not acquired by “winning” ina competition over quality and efficiency of services. Rather, thosehospital systems acquired it the old fashioned way—they simply boughtit by acquiring physicians’ practices and, in a number of markets, byconspiring with payors to keep any physician-investor facilities out ofnetwork. Payors speak openly of a policy of refusing to contract withphysician investor facilities. At least one general acute care physicianinvestedfacility was choked to near-death recently in Houston, andothers are facing an identical threat.You can dress it up, even put a lab coat on it, but this is the corporatetakeover of the practice of medicine. It is about control and market share,not necessarily patient care. One need look no further than the recentdebacle in the Denver market, where HealthOne/HCA, on the brink of a$14 billion private leveraged buyout, and sitting on well over half of thehospital beds along the front range, played chicken with United and theirenlarged market share, newly acquired by purchasing PacifiCare. Theshort term result was a train wreck that scattered thousands of patientsacross several counties to avoid facing extravagant out-of-network costs.Economists describe this phenomenon as only they can: A “bilateraloligopoly,” which loosely translates as too few buyers and sellers. Uniteddidn’t want to acquire HCA’s leveraged debt or meet their pricedemands, and HCA needed to assure investors of their long termprofitability to cover that hedge. They eventually made up,but physicians still face two players who on any given day can vaporizetheir practice with a simple memo that mentions the word “decredentialed.”These are not conditions under which the hospital associations,typically dominated by large commercial systems, can plead poverty,unfair competition or even cherry picking. So, they wrap themselves inthe cloak of your home grown, locally owned community hospitals(especially if they’re rural) to make their case to legislatures and theCongress that the evils of self referral, however well intentioned theinvestor physician may be (they always add this condemnation-withfaint-praise),will push them to the brink of extinction. There very wellmay be circumstances in which the patient mix disfavors the communityhospital, when physicians move next door and open a surgical hospital.In fact, this can get national attention if it is in a state that happens tohave a powerful member of Congress—say, the Senate Finance Chair.However, hospitals are, in the aggregate, anything but impoverished.Business is pretty darn good. In 2005, the all-time profit for communityhospitals was $28.9 billion (Appleby, “Health & Behavior,” USA Today,11/12/06), surpassing the 2004 all-time high. Looking around thecountry, one could suggest that the ubiquitous state bird is a hospitalbuilding crane. We are in the middle of the biggest building boom sinceHill Burton injected steroids in the hospital market 50 years ago.According to SEC filings, for-profit hospital systems enjoyed profitmargins of 4.8 percent to 5.8 percent, and operating margins of 7.8percent to 10.3 percent in 2005 reflecting the higher prices that they havebeen able to leverage.This commentary need not mention, except in passing, that the notfor-profit-in-name-onlysystems are coming under close congressionalscrutiny over their tax exempt status. Most of these poor, starvingsystems have been able to extract seven or so percent increases frompayors for the last several years, a testimony to their growing marketpower.Meanwhile the health plans have also acquired market share in the oldfashioned way: acquisition and merger. According to a fairly recentAMA report, in 38 states, one payor controls at least a third of thecommercial market. In 16 states, that share jumps to 50 percent. If youlook at the urban markets, these figures jump through the roof.Physicians, on the other hand, have largely been flatlined reimbursement-wise,and, on the Medicare side, go to the brink of the SGR cliffevery year before being pulled back by an Act of Congress that leavesthem with say, only a three or four percent de facto cut instead of a fiveplushit like the other players in the industry. Being squeezed on bothsides, it should come as no blinding revelation that physicians wouldwant to shift from being the exploited source of labor to the owners ofcapital. This was, ironically, how most community hospitals got theirstart: with physician equity, of both the fiscal and sweat variety.The debate has followed a predictable trajectory: states with certificate-of-need(CON) laws have seen relatively little growth, while thosewithout a CON statute, especially if combined with a prohibition againstcontinued on page 7472 Orthopaedic Product News • January/February 2007

Enquiry No 29

SPECIAL FEATUREcontinued from page 72the corporate practice of medicine, have seen steady if not explosivegrowth in physician investor facilities. Surgical hospitals have beenevolving into more general, acute care facilities, largely to satisfy the“whole hospital” exception to the Federal self-referral prohibitions andlocal political criticism. A number of regional hospital systems took theenlightened view that partnering with physicians in ownership ofhospital ventures would be mutually beneficial, rather than trying to beatthe physicians into submission (via purchasing their practices) orclubbing them to death (by excluding them from in payor networks). Theregional hospital systems have become a natural ally in the ensuinglegislative debates, and in many state legislatures an instructive, crediblevoice on the benefits of collaborating and assuring competitive choicesin the increasingly consolidated world of health care. The systems thathave worked cooperatively with physicians seem to be more successfulin developing a strong, integrated delivery system.Meanwhile, their commercial competitors subsequently raised alarmsand manned the public affairs ramparts in all of the usual venues, fromthe local newspapers to the halls of state legislatures and congressionaldelegations. Hearings ensued, a spate of dueling studies produced amoratorium imposed that then expired, a de facto moratorium reimposed,then more hearings and mostly inconclusive legislative andregulatory results. The final word (if that can be said with any certainty)comes from MedPAC and the Government Accountability Office(GAO), which have tracked and analyzed this phenomenon long enoughto make several observations:1. MedPAC explains the growth as partially a consequence of discrep--ancies between Medicare’s payment rates and hospitals’ averagecosts per discharge, which means wide differences in profitability,which in turn “create financial incentives—for all hospitals,specialty and nonspecialty alike—to specialize in treatingrelatively profitable DRGs.” CMS logically has recommendedchanges to the Inpatient Prospective Payment Systems (IPPS),including changes specific to DRGs to equalize these payments andremove the disproportionate incentives. This alone will likely, overtime, shift the direction of physician investment more towardgeneral acute care.2. An April 2006 GAO survey found that “with few exceptions,general hospitals did not report implementing a substantiallydifferent number of changes or different types of changes justbecause there was a specialty hospital in their market.” GAO notedthat a large proportion of their survey respondents reported making“operational and clinical service changes,” which of course impliesan incipient trend in competing over the things that should matter.This latter trend—of non-physician hospitals retooling theirpatient/service aspects to match the service levels of their physiciancompetitors—has largely gone unnoticed in the public policy debate,with the obvious exception of those patients and physicians who haveexperienced the difference when physicians have a significant say in thedelivery of inpatient care. A recent headline in the Austin (Texas—yes,the authors are by definition provincial Texans) American Statesmanreads, “Central Texas Hospitals Improve Cardiac Care, Reduce ED WaitTimes,” which one regional hospital euphemistically attributed to “a risein competition among hospitals.” The “innovations” include installing“more cardiac monitors in patients rooms,” using bedside cardiacenzyme testing to reduce the turnaround on a diagnosis, triaging cases inthe ED and “providing patient instructions while they are waiting to bedischarged.” The story didn’t note that the competitor who spawned thischange is Austin Heart Hospital, a physician investor facility, wherethose “innovations” are standard operating procedure.Failing to prohibit the “innovative” competition of physician-ownedfacilities, the large systems have now started utilizing their local marketleverage to stifle them. With their allies, the managed care plans, thehospitals are able to keep physician-owned hospitals out of network.Another even more potent threat is to terminate from the plan physicianswho treat patients at physician-owned hospitals. Doing so effectivelyprecludes the use of out-of-network physician-owned hospitals eventhough the plans pretend to have an out-of-network option for theirmembers. Consequently, the alliance denies the physician-ownedhospitals’ participation in the networks and thus, denies patients informationabout out-of-network facilities.There is, of course, a bigger picture. Disparities in patient mix arewidening as a consequence of the state and Federal governments’ studiedindifference or partial remedies, not to mention perverse reimbursementand coverage policies and higher hospital costs, which produce moreworking uninsured and underinsured. This will no doubt exacerbatetensions among the entire provider community and add more heat, if notlight, to the perennial experiments to close those gaps and the not sohidden tax that the working uninsured impose on these systems.Removing the potential for competitive choices among facilities,especially competition over the qualitative parts, or looking the otherway while systems grow ever larger and beyond the reach of eithergovernment or market accountability seems at best counterintuitive.Surely competition among the hospitals could at least reduce hospitalcosts and reduce some inflationary pressure.So, as MedPAC has already implied, adjusting reimbursements toequitably reflect relative value and cost is a rational start to some of thesepayor-mix problems. At the risk of restating the obvious, a logicalextension would be to improve the patient mix and allow competition towork its magic of bringing a system back into equilibrium. After all, ifyou can bill it, they will come.David W. Hilgers, J.D., is a Partner at Brown McCarroll, L.L.P. andleads the firm’s Heath Care Section. Mr. Hilgers is a graduate of theUniversity of Texas School of Law and received his B.A. fromSwarthmore College. He can be reached at dhilgers@mailbmc.com.Kimble (Kim) Ross is a partially rehabilitated lobbyist and former VicePresident for Public Policy and Director of Public Affairs for the TexasMedical Association. In 2003, Mr. Ross formed Kimble Public Affairs,which specializes in health care policy and political strategy with aspecial emphasis on physicians’ rights. He can be reached atrosskimble@hotmail.com.Enquiry No 9274 Orthopaedic Product News • January/February 2007

Enquiry No 30

ARTICLEThe Introduction of CaseCoder:One Solution for Undercoding orMiscoding Spine ProceduresAuthor: Barbara McBride, MBA, CPCCaseCoder was created to simplify the process of capturing the correctreimbursement for spine procedures. It is a hand-held coding managementsystem designed to ease the tedious issues of coding. Twentyyears of experience have identified that there is a significant concern forundercoding and miscoding procedures that are being performed in thespine field. Due to the complexity of the coding protocol, as well as thesignificant number of codes that are applied to these procedures, thepropensity to code incorrectly is evident. Approximately 20 to 30 percentof cases submitted to carriers are undercoded, resulting in an immediatereduction in reimbursement to the physician.Standard coding procedure for a spine specialist is to provide thebilling staff with surgical notes for coding and claims filing. The specialist’sbilling staff must decipher from the surgeon’s notes which techniquesand devices were used and determine from hundreds of codeswhich ones are appropriate for billing. This is a formidable process forboth the spine specialist and the office staff, yet it is a significant part ofthe business. Many of the cases that are commonly miscoded are thosethat involve instrumentation with fusion, interbody fusion withimplants, inappropriate selection of procedures based on lesion diagnosisand deformity versus degenerative disease selection. The impact ofthis miscoding can be as little as $100 per case to thousands of dollarsper case, depending upon the coding errors. For example, if a surgicalcase is coded as a deformity when in fact it is a degenerative spine withsubsequent deformity, the surgeon can possibly lose thousands of dollars.Similarly, if the physician is to code an interbody fusion at severallevels and forget to bill for an implant at each level, he then too is omittinga significant amount of reimbursement based on his contractedpositioning.With CaseCoder, coding can be done immediately following an operationby simply answering a series of consecutive questions on thehand-held device. As the spine specialist follows the prompts andchecks the boxes for the procedure conducted, CaseCoder narrowsdown the coding choices automatically. Within just a few clicksCaseCoder provides the specialist with the proper codes for billing andreimbursement.Our pilot study participants, comprising spine surgeons and practicemanagers, found a reduction in submission errors, faster documentationset for billing and an increased awareness of prior miscoding. “Havingthe ability to walk out of the OR and quickly and easily code my procedurewill be an incredible time saver for me and my staff,” said Dr. MarcAgulnick, Spine Surgeon at Winthrop University Hospital, New York.“Having a product like CaseCoder that can assure me that my codedclaims are now error proof is an incredible asset to my practice and ourfinancial performance.”Other applications and benefits:• ability to quickly attain preauthorization for a procedure• instant billing to shorten turnaround• internal auditsCaseCoder runs on Window XP or Windows Mobile. It is supportedby a call center and the appropriate training via a web based online module.It will be available in February 2007.Barbara McBride, MBA, CPC, is the Chief Executive Officer forBusiness Dynamics Limited (www.businessdynamicsllc.com). With over20 years of experience in spine billing and collection, she has developedan organization that is dedicated to the spine community by offeringcustomized billing services, focused spine education and CaseCoder.She can be reached at contact@businessdynamicsllc.com or 516-294-4118.Enquiry No 9376 Orthopaedic Product News • January/February 2007

Enquiry No 31

THE TOP LINEFair Market Value: What Is Itand Why Is It so Important?Author: Teresa FordIf you are a physician who consults with industry, an owner of an ancillaryservices facility to which you might refer, or involved in a myriadother business arrangements where the Stark Law (“Stark”), the Anti-Kickback Statute (the “AKS”) or various other health care laws areimplicated, the term “fair market value” is likely familiar to you. Butbeing familiar with it is not the same as understanding both its purposeand its importance in the current health care regulatory environment.Fair market value as defined in the Stark regulations means:“… the value in arm’s-length transactions, consistent with the generalmarket value [of such services]. “General market value” meansthe price that an asset [or services] would bring, as the result ofbona fide bargaining between well-informed buyers and sellerswho are not otherwise in a position to generate business for theother party; or the compensation that would be included in a serviceagreement, as the result of bona fide bargaining between wellinformedparties to the agreement who are not otherwise in a positionto generate business for the other party, on the date of acquisitionof the asset or at the time of the service agreement. Usually, thefair market price is the price at which bona fide sales have beenconsummated for assets of like type, quality, and quantity in a particularmarket at the time of acquisition, or the compensation thathas been included in bona fide service agreements with comparableterms at the time of the agreement.”Basically, then, fair market value (“FMV”) is just what it soundslike — it is a value placed on goods or services that is considered “fair”and supported by “market” conditions. Why do you, the consulting,designing and developing surgeon, care about the concept of FMV?Because if you are not compensated at a rate that is considered FMV forthe services you are providing, you could be violating the Federal healthcare fraud and abuse laws; you have read enough of my columns toknow that is not a good idea!Knowing that FMV is important, the next logical question is, “Howdo you figure out what FMV is for goods or services?” Becauseorthopaedic surgeons who consult with industry are a focus of my practice,as well as regular readers of OPN, and because my space here is,thankfully, limited, we will focus on how FMV should be computed forphysicians providing services to industry. The FMV issues raised in theother scenarios mentioned above will be reserved for another day.The Published Guidelines. Several companies compile salaryguidelines on an annual basis and publish them in book form as aresource for entities that are employing or contracting with physicians.While these guidelines do not specifically track the kinds of monies thatphysicians make providing consulting services, they serve as an excellenttool for determining a reasonable continuum for the FMV of a particularphysician’s time. The Stark regulations expressly reference sixsurveys that the government considers acceptable for determining whatto pay a physician under various circumstances. They are as follows:(a)(b)(c)(d)(e)(f)Sullivan, Cotter & Associates, Inc. Physician Compensationand Productivity SurveyHay Group – Physicians Compensation SurveyHospital and Healthcare Compensation Services – PhysicianSalary Survey ReportMedical Group Management Association - PhysicianCompensation and Productivity SurveyECS Watson Wyatt – Hospital and Health Care ManagementCompensation ReportWilliam M. Mercer – Integrated Health NetworksCompensation SurveyThese surveys break down compensation by specialty, geographiclocation, size of practice, type of practice and years of experience in aneffort to provide as comprehensive a picture as possible regarding whatconstitutes FMV. Again, while not directly applicable to hourly compensationfor a consulting physician, the continuum that each survey providesfor physician compensation should be considered when determiningwhat a physician’s appropriate hourly rate for consulting should be.Industry Standards. As a general rule, device manufacturers haveinternal matrices that document the kinds of hourly rates that they willpay for specific services. While considering raw salary data such as thatcontained in the published guidelines, certain other intangibles are usuallyconsidered when determining the FMV of a particular physician’stime. For example, a consultant who teaches at an academic centerwhere research is a primary focus of his work has increased value to thecompany that is looking for an experienced researcher to assist with preorpost-market research; similarly, a consultant with international influencewho can appeal to and work with surgeons around the world hasparticular value to the international company that desires to use one consultantfor various kinds of work with more than one company affiliate.These are examples of factors that can legitimately impact the FMV calculationwhen determining consultant compensation and are appropriatelyconsidered when determining a consultant’s compensation rate. But“intangible” considerations such as these must be well documented andmust not be used to justify payment to a consultant of monies that are farcontinued on page 7978 Orthopaedic Product News • January/February 2007

THE TOP LINEcontinued from page 78and away more than the salary guidelines indicate is acceptable. As asavvy consulting physician, you should always be certain that the compensationthat you are receiving reflects the FMV of your time and thatthe company with whom you are contracting has taken all of the necessarysteps to document and justify the concept of FMV. Remember, youstand to lose much more than any manufacturer if your agreement withthem is found to violate the health care fraud and abuse laws.The concept of FMV is simple — determining it is not always so.Therefore, it is prudent to understand exactly why you are being offeredthe compensation that you are for any consulting, design or developmentwork. And while we all want to command as high a fee as marketconditions will allow, that lofty goal needs to be tempered by whatshould be your number one goal — being and staying compliant withthe federal health care fraud and abuse laws.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 tford@tfordlaw.com.Enquiry No 94Law Offices ofTeresa Ford, PCProud to serve the physician community in matters ofhealth care compliance and business structuring2500 Tanglewilde, Suite 318, Houston, Texas 77063tel: 832.251.9595 • fax: 832.251.9599email: tford@tfordlaw.comwww.tfordlaw.comNot Certified by the Texas Board of Legal SpecializationEnquiry No 15Enquiry No 32January/February 2007 • Orthopaedic Product News 79

PRODUCT FEATURESProduct FeaturesInclose Surgical Mesh ProductDescriptionThe Inclose Surgical Mesh System is a novel, patented implantdesigned to provide a barrier and scaffold to facilitate the repair of softtissue. The surgical mesh implant is comprised of polyethylene terephthalate(PET) monofilament braidmaterial that is preloaded on a disposabledelivery tool. The mesh implanthas a low profile, allowing it to beinserted in a minimally invasive mannerprior to being expanded below theaperture of a tissue defect. The meshimplant can be secured in place withanchors comprised of nonabsorbablesurgical suture.Anulex Technologies, Inc.Tel: 952-224-4000www.anulex.comEnquiry No 95Deepwave ® PercutaneousNeuromodulation Pain TherapySystemThe DEEPWAVE ® percutaneous neuromodulation pain therapy systemis a minimally invasive, office-based treatment for the management ofchronic, acute and post-operative musculoskeletal pain located in theback, joints or extremities. The DEEPWAVE system features a patentedpercutaneous electrode array (PEA) that is comprised of over 1000microneedles. The PEA facilitates the delivery of proprietary electricalsignals percutaneously through the skin into deep tissue encompassingthe pain site and inhibiting the transmission of pain. DEEPWAVE therapyis provided in the physician’s office, clinic or hospital and can generateincremental revenue for the practice. The DEEPWAVE systemhas been investigated in multiple clinical studies, including blindedrandomized controlled trials, and has demonstrated that a single 30-minute treatment immediately provides patients with a 75% averagereduction in pain and a significant increase in range of motion andfunction which last for upto 24 hours. Additionalfindings from these studieshave also shown thatDEEPWAVE treatmentscaused patients to reducetheir consumption of painmedication.Biowave CorporationTel: 203-855-8610www.biowave.comEnquiry No 97CERAMENT - Injectable BoneBoneSupport recently obtained FDA clearancefor CERAMENT|BONE VOIDFILLER, a synthetic, ceramic, injectable bonesubstitute used for repair of bone defects.CERAMENT|BONE VOID FILLER widensthe range of therapeutic options for clinicians,creating the potential for effective treatmentof bone defects and fractures.CERAMENT|BONE VOID FILLER isthe first product to be commercialized from the CERAMENT platform.CERAMENT is an osteoconductive bone-like material that provides adouble advantage: it penetrates and reinforces bone while allowing forfuture bone ingrowth. Patented technology is the source of the uniquequalities of CERAMENT. CERAMENT is both radio-opaque andinjectable, facilitating quick and simple access to all parts of the skeleton.CERAMENT|SPINE SUPPORT, the second product, is currentlyundergoing clinical trials.(CERAMENT|BONE VOID FILLER received FDA 510(K)KO51957 clearance. CE mark pending.CERAMENT|SPINE SUPPORT, regulatory processes pending. Notavailable for sale; for investigational use only.)BoneSupport ABTel: 011-46-46-286-53-70www.bonesupport.com Enquiry No 96X STOP IPD SystemThe X STOP ® Interspinous ProcessDecompression (IPD ® ) System (“X STOP”)is the first and only FDA-cleared, nonfusiontreatment for lumbar spinal stenosis(LSS). The X STOP presents patients sufferingfrom LSS with a safe and effectivesurgical alternative that offers outcomescomparable to laminectomy with the lowriskprofile of therapeutic alternatives (analgesics,steroid injections or physical therapy).Interspinous Process Decompression, or IPD, is a minimally invasivesurgical procedure, typically performed in under an hour, in which an XSTOP implant is placed between the spinous processes of the symptomaticdisc levels. The unique design of the X STOP allows it to be implantedwith a straight-forward approach without fixation to bones or ligaments.The X STOP IPD procedure is completely reversible without compromisingany future therapeutic or surgical alternatives, including laminectomy.X STOP IPD is reimbursed by the Centers for Medicare & MedicaidServices (CMS) and by most major health plans. Upon pre-certification,greater than 80% of payors are extending benefits for coverage. CMS hasapproved a special add-on payment for the X STOP IPD procedure, providingsupplemental hospital reimbursement effective FY 2007.St. Francis Medical Technologies, Inc.Tel: 510-337-2600, www.sfmt.comEnquiry No 9880 Orthopaedic Product News • January/February 2007

PRODUCT FEATURESNovaboneNovaBone is a 100% synthetic bonegraft device manufactured byNovaBone Products, LLC and availableexclusively through theMusculoskeletal TransplantFoundation (MTF), the world’slargest tissue bank. NovaBone is anosteostimulative material that createsa scaffold for new bone growth in anyosseous defect.NovaBone is a bioactive materialcomposed entirely from elements thatoccur naturally in the body - calcium, phosphorus, sodium, silicon andoxygen. When implanted, a surface modification process is initiated thatresults in the gradual dissolution of the material, releasing these ions intothe local environment to promote new bone formation. The device ultimatelyis absorbed, resulting in a healed osseous site.This unique bone graft substitute is made available in granules for versatilityin filling in osseous defects in the spine, extremities and pelvis. Formore information on NovaBone, or to order, contact the MusculoskeletalTransplant Foundation.Musculoskeletal Transplant FoundationTel: 800-433-6576, www.mtf.orgEnquiry No 99Osborne Orthopedic Group, Inc. andVaupell launch the BOWTIE ® !Osborne Orthopedic Group, Inc. and Vaupell announced the release ofthe BOWTIE ® , a device to secure and protect the surgeon’s lines andcords. The BOWTIE is ideal for all types of arthroscopic and laparoscopicsurgery. Grooves in the arms of the BOWTIE are specifically measuredand fit to secure and protect the inflow and outflow tubes, powercords and light sources. The wings on the BOWTIE allow for easy securingto the surgical drape with any surgical clamps.A latch on the BOWTIE opens and closes easily to allow for simpleadjustment of cord or line length per the surgeon’s preference. BOWTIEmay be of unique help to new surgical technicians and residents in settingup cases.Osborne Orthopedic Group, Inc.Tel: 1-877-BOWTIE4www.bowtie.osborneorthopedics.comEnquiry No 101ISSYS Pedicle Screw SystemISSYS (Inverted ScrewSYStem) has been describedby its users as the first realinnovation in top loadingscrews since their inception.The ISSYS Polyaxial PedicleScrew can be fully seated intothe pedicle for stability, whilemaintaining its full range ofmotion. The system also providesan impressive 6.4mm of medialcorrection, which is an approximate60% increase over most top loadingsystems. Its unique Saddle Pin designallows the flexibility to change the screwhead in situ from polyaxial to rigid andreverse, while accommodating both 5.5mmand 6.0mm titanium rods. The ISSYS bonescrew has a double lead, buttress thread with atapered ID and cylindrical OD. These featurescombine to provide faster insertion and exceptionalpurchase in poor quality bone. The ISSYS systemhas 11 pending patents, eight involving instrumentationand three involving implant design. TheScrewdriver is truly toggle-free and has an intuitive onesteplocking mechanism. The Rod Persuader is extremelylow profile and is easily operated with one hand. Many of theinstruments were developed with MIS in mind. Custom Spinebelieves innovation will always stand out.Custom SpineTel: 973-808-0019www.customspine.comEnquiry No 100Collagen Bone Healing ProtectiveSheetThe Collagen Bone Healing Protective Sheet is used to maintain the relativeposition of weak bony tissue such as bone grafts, bone graft substitutes orbone fragments from comminuted fractures. The product is also indicated forcement restriction in total joint arthroplasty procedures.The Collagen Bone Healing Protective Sheet is a white, nonfriable, conformable,resorbable sheet engineered from highly purified type I collagen.The product can be cut with scissors to the desired shape and size. It is fullyconformable when hydrated and can conform three-dimensionally to mostany anatomical orientation. The Collagen Bone Healing Protective Sheet canbe rolled into a tube or used as a flat sheet. It can be used either alone or inconjunction with internal bone fixation devices such as plates and screws,which also can serve to further stabilize the anatomical region.Collagen Matrix, Inc.Tel: 201-405-1477www.collagenmatrix.comEnquiry No 102January/February 2007 • Orthopaedic Product News 81

PRODUCT FEATURESambIT ® PreSet Infusion PumpIt’s as easy as one-two-three. Now you cancontinuously deliver a precise dose of localanesthetic directly to your patient’s surgicalsite with an electronic infusion pump that’seasy to use. Sorenson Medical’s newambIT® PreSet infusion pump makes setupand programming a snap. First, chooseone of four pre-set infusion protocols.Second, select the total volume of anestheticyou want to infuse. Third, attach the medicationbag and press “Start.” That’s it.Sorenson Medical’s new ambIT PreSetpump hangs from a belt pack, runs on twoAA batteries, has a patient-controlled bolusbutton, and delivers anesthetic with an accuracyof +/-6 percent. ambIT PreSet allowsyou to reduce your infusion pump set-up timeto almost nothing, but you retain the option to customize programming ofinfusion protocols as well. Because your patients remain pain-free andambulatory, they are soon ready for rehab.Sorenson MedicalTel: 877- 352-1888,www.sorensonmedical.comEnquiry No 103OssiMend Collagen-MineralComposite Bone Graft MaterialOssiMend Collagen-Mineral CompositeBone Graft Material is intended for use inorthopaedic-spine applications involvingbone repair. OssiMend, combined withautologous bone marrow, is used to fill bonyvoids or gaps of the skeletal system, includingspine, extremities and pelvis. The productis a composite matrix available in strips, pads or granular form for surgicalimplantation. The principal components of the product are type I collagenand anorganic bone mineral. The natural anorganic bone mineral isderived from bovine cancellous and cortical bone. Due to its natural structure,OssiMend is physically and chemically comparable to the mineralizedmatrix of human bone. The mineral particles are dispersed within highlypurified type I collagen fibers, forming a three-dimensional open porousmatrix for use as an osteoconductive material.Collagen Matrix, Inc. Tel: 201-405-1477www.collagenmatrix.comEnquiry No 104For More Information......on any Articles, Ads or Products within the Product News or Product Featuressections, simply mark the numbers off the Reader Enquiry Card and send it to us -we’ll put you in touch with the right people.Mail it back to us or fax the card to:440-247-905382 Orthopaedic Product News • January/February 2007

Enquiry No 33

HERE’S TO YOUR WEALTHFinding the Right CharitableGiving StrategyAuthor: Jeffrey B. MackevichNo one is useless in this world who lightens the burden of another.Charles DickensTo keep a lamp burning, we have to keep putting oil in it.Mother TeresaIf you don’t have any charity in your heart, you have the worst kind ofheart trouble.Bob HopeIf you had all the money in the world and could use it to solve any issuein the world, what would you choose to address? How much would youcontribute? Would you simply write a check, or donate other assets suchas securities, mutual or hedge funds, real estate or valuable collections?Would the donation be a one-time event or a pledge of annual gifts overmany years?Philanthropy is fashionable, and the good news is that as personalwealth has grown worldwide, so has philanthropic activity. In 2005,charitable donations exceeded $7 billion. A number of reasons have beencited for the increase in charitable donations, one important reason beingthe ease of donating. The Internet and other news sources provide us withreadily accessible information about ways to contribute to majordisasters, such as 9/11, the Tsunami, Hurricane Katrina, etc. High profilegifts, such as Warren Buffet’s multi-billion dollar pledge to the Bill andMelinda Gates Foundation, are also encouraging more giving. I’ve oftenfound that larger donors favor special causes in which they can have animpact and feel a personal connection to the issue.The most important reason to make charitable donations is tocontribute to a cause that you believe in. But, there are various methodsof charitable giving that also have benefits for you as the donor. Many ofus write checks to our favored charities each year and get a tax deductionin return. This works well for smaller donations, but may not be efficientfor larger gifts of $1,000 or more. When considering charitable giving, itis important to evaluate how your donation will impact your tax situationand other factors such as retirement income.Thanks to strong performance in the stock market over the past threeyears, many of us own stocks or mutual funds that have grown in value.It is very easy to donate appreciated shares or funds to charities, and thetax benefits can be greater than making cash donations. In fact, thecapital gains tax on selling securities is avoided and you receive theentire current value of the shares as a tax deduction (up to 30 percent ofAdjusted Gross Income). This is a marvelous incentive, but in my experienceit is relatively underused by investors.It is also possible to pledge future donations of real estate or valuable(art) collections, yet receive immediate tax benefits. Charities are veryreceptive to and flexible with these arrangements.Under the Pension Protection Act of 2006, individuals over the age of70 1/2 can make charitable contributions of up to $100,000 directly fromtheir Individual Retirement Accounts to favorite charities with no tax onthe income. For individuals with large balances in your retirementaccounts, this option helps you achieve three goals at once: you canwithdraw retirement funds tax free, contribute to an important cause andreduce your taxable estate. The window for this option is only open untilDecember 31, 2007, so I encourage eligible investors to discuss this withtheir advisors.One of the most popular methods of giving is through the DonorAdvised Fund. These are offered by mutual fund companies andcommunity organizations. By using this option, your donation of cash orsecurities is reinvested into mutual funds, managed accounts or hedgefunds for long-term growth. This arrangement is very flexible, in thatcharities can receive the funds now or later, you can choose any type ofcharity, or you can choose to have your children make these decisions inthe future. The benefits of Donor Advised Funds are they are simple, donot require much paperwork, have low minimums with start-up contributionsas low as $5,000 and are less costly than creating trusts or foundations.You receive an immediate tax deduction for your deposit, and it isnot included in your taxable estate.For those who may need more income for retirement years, a PooledIncome Fund may be a better option. Pooled Income Funds are similar toDonor Advised Funds, except that you (and your spouse if applicable)receive income for life. After your death the funds go directly to charitiesor into a Donor Advised Fund for your heirs to manage. However, the upfronttax deduction is less in this method due to the income stream.With so many organizations and philanthropic causes seekingfunding, some investors are not comfortable making a selection on theirown. Rest easy! Several donor groups offer support. An example is“Foolanthropy,” offered by the Motley Fool group. You can join alongwith five million other “fools” to nominate worthy organizations andcontribute to their pool. The group analyzes charities the same way theylook at investments. Deserving charities receive donations from the pooland some receive special awards from Motley Fool.continued on page 8684 Orthopaedic Product News • January/February 2007

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HERE’S TO YOUR WEALTHcontinued from page 84Once you’ve selected the appropriate vehicle to carry out yourcharitable giving, the process is very rewarding. I also encourageinvestors to include their children and grandchildren in this planningprocess. Philanthropy can be used to teach children and grandchildrennot what money can buy, but what it can do. It can bring focus andmeaning to children and help them develop a strong moral compass.Volunteer programs, charitable-giving vehicles and family constitutionsare just some examples of the tools financial advisors use to teach socialawareness and financial responsibility. The need is great and the returnis, in many instances, priceless.Jeff Mackevich is a Managing Director in the Investment Brokeragegroup at Mesirow Financial. With more than 25 years of wealth managementexperience, Jeff specializes in analyzing and strengthening theinvestment programs, income portfolios and tax strategies of affluentindividuals. He can be reached at jmackevich@mesirowfinancial.com or312-595-6384. Any opinions, statements or advice contained hereinare purely the author's and in no way reflect those of MesirowFinancial Holdings, Inc., or any of its affiliates and subsidiaries.Mesirow Financial does not provide legal or tax advice.Services offered by Mesirow Financial, Inc. Member NYSE, SIPC.Enquiry No 105Are you interested insharing your wisdomwith fellowsurgeons infuturearticlesof OPN?Editorial content andtopics of interest arealways welcomed.Contact OPN at: usopn@orthoworld.com86 Orthopaedic Product News • January/February 2007

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Enquiry No 36