Gary Ellis, Medtronic’s chief financial officer, tells investors that the medical device maker is not making a strategic shift away from group purchasing organizations, despite the recent cancellation of several GPO contracts with Premier and Novation.
Medtronic Inc. (NYSE:MDT) is not changing its stance on group purchasing organizations, despite recently canceling several contracts with Premier and Novation, two of the industry’s largest GPOs.
“There’s a lot of speculation around here that a strategic change is going on,” Medtronic CFO Gary Ellis told analysts at the Barclay’s Capital Investors Conference in Miami. “That is not the case.”
GPOs play a significant role in the delivery of healthcare, Ellis noted, and they’re beneficial in streamlining the process of selling into hospital systems.
“We intend to maintain our relationships with GPOs that are providing a benefit,” he said.
Medtronic made headlines in February when it canceled several contracts for its cardiovascular and orthopedic products with Novation LLC — deals worth an estimated $2 billion per year. A few weeks later the Fridley, Minn.-based medical device giant spiked a deal with Premier Inc. for some of its spine products.
After the Premier deal ended, Medtronic spokesman Chris Garland told MassDevice in an email that the decision to end both deals were made because the company felt it would do better negotiating contracts directly with hospitals.
“Our only comment is that we are confirming that our spinal business terminated a national contract with Premier,” Garland wrote. “We did this for the same reasons we terminated five Novation contracts earlier.”
The moves prompted a strong backlash
from the Health Industry Group Purchasing Assn., a trade group representing the GPO industry.
“GPOs work on behalf of hospitals and other health care providers, and GPO contracts are based on strong competitive forces. Manufacturers compete with one another to win business by offering the best products and services at the best value. Medtronic has simply abdicated this competitive space in an effort to prevent hospitals from banding together to get the best deals. The result is purely predatory,” Rooney said in prepared remarks.
The Massachusetts Medical Devices Journal is the online journal of the medical devices industry in the Commonwealth and New England, providing day-to-day coverage of the devices that save lives, the people behind them, and the burgeoning trends and developments within the industry.
