Cardinal Health extends distribution deal with sponge-safety company

DUBLIN, Ohio — Health services firm Cardinal Health has extended its exclusive distribution agreement with a California company that’s developed a system to help track sponges used in surgical procedures.

The new agreement calls for Cardinal to co-market for the next five years the SurgiCount Safety-Sponge System from Temecula, California-based Patient Safety Technologies, according to a statement from the companies. Cardinal has been distributing the sponge-safety system since 2006.

Cardinal has placed a $10 million purchase order for SurgiCount products over the next year. As a deal sweetener, Cardinal will receive warrants from Patient Safety to purchase 1.25 million shares of the California firm’s common stock at $2 per share and another 625,000 shares at $4.

Patient Safety’s shares last traded at $1.70 on the over-the-counter bulletin board, a listing of stocks from companies that are often small, risky and unstable. In the third quarter, Patient Safety suffered a net loss of $3.3 million on revenue of $956,000.

“Our enhanced partnership solidifies the Safety-Sponge System as Cardinal Health’s preferred technology to help our customers protect their patients from retained foreign objects during surgeries,” said Steve Inacker, president of Cardinal Health’s clinical and procedural businesses.

The SurgiCount system aims to increase the accuracy of sponge counts performed in hospitals. The system works by labeling each sponge to be used in a procedure with a serial number embedded in a bar code. A counter is then used to scan and record the bar codes during initial and final sponge counts. Because each sponge is identified with a unique code, the system doesn’t allow the same sponge to be counted more than once, helping users obtain a more accurate sponge count, according to the statement.

In April 2008, Cardinal signed a distribution agreement with ClearCount Medical Solutions, a Pittsburgh company that has designed a system that uses radio frequency identification to count and detect surgery sponges. ClearCount’s system was the first sponge-counting and detection system to receive clearance from the U.S. Food and Drug Administration, according to a statement announcing the agreement.

However, ClearCount may have fallen out of favor with Cardinal. A Cardinal spokesman said bar code technology, which the SurgiCount system uses, is the company’s “preferred” means of tracking sponges because it’s less prone to outside interference than RFID.