Dropping GPOs: Medtronic's Hawkins Expects More Of It From MedTech

Article preview from "The Gray Sheet"- March 7, 2011

Medtronic CEO Bill Hawkins says he would be "shocked" if some competitors did not follow his firm's lead this year with cancellations of large group purchasing organization contracts.

Dropping GPOs: Medtronic's Hawkins Expects More Of It From MedTech

By David Filmore

Article preview from "The Gray Sheet"- March 7, 2011

Last month, the company terminated five national contracts with the GPO Novation for sales of cardiovascular and orthopedic devices.Earlier this year, Medtronic also canceled a national contract for spinal devices with Premier, the second largest GPO behind Novation.

Despite administrative fees paid to GPOs by suppliers, which tend to be about 1% to 3% of contract purchases, the contracts did not appear to help grow market share, according to Hawkins.

"We've been evaluating over the last couple of years whether or not by paying them a fee ... we have actually been getting anything for it,” Hawkins acknowledged March 2 at the Citi Global Healthcare Conference in New York.

"The reality is, when I look at it, in the case of Novation and our spine business and [Cardiac Rhythm Disease Management] business, I didn't see in the Novation hospitals my market share being any different. In fact, to be candid with you, it was a little bit below the national average," he added.

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