Oct 24, 2011

Medical device manufacturers in the US market are reporting mounting pressure to lower product prices as clients such as hospital groups seek to lower procurement costs and stem operating losses.

According to a survey by hospital group purchasing organization Premier Inc. (via Dow Jones Newswire), hospitals have lost more than $1 billion due to high-cost medical devices and have indicated interest in purchasing lower-cost alternative products in the future.

In another Premier survey of hospital executives cited by the Dow Jones article, a majority of respondents reported plans to seek less expensive alternatives to brand-name medical devices that could provide similar or better clinical outcomes, potentially squeezing profits for top-tier manufacturers like Medtronic and Boston Scientific.

Hospitals’ 2010 losses stemmed from Medicare reimbursement shortfalls for cardiac and orthopedic procedures involving implantable medical devices, Premier reports; highest losses involved heart valve replacement and spinal fusion procedures. Manufacturers have traditionally relied on physician practices as clients for sales of cardiac and orthopedic devices, but hospital groups have bought up much of that client base in recent years.

In the Dow Jones story, analysts at Goldman Sachs and Mizuho Securities expressed caution regarding medical device industry growth next year in part due to Premier’s findings on hospital groups’ purchasing plans. But while cardiac and orthopedic device manufacturers may feel the most pressure to reduce prices, makers of lower-cost and commoditized medical devices and supplies should be much less impacted by hospital groups’ buying decisions.


  • Stewart Eisenhart