Hospitals Pressure Medical Device Companies to Reduce Prices

With many hospitals reducing costs in the economic downturn, medical device manufacturers are feeling the pinch as many reported lower sales in U.S. markets for the third quarter, according to a report in the Wall Street Journal.

St. Jude Medical and Boston Scientific both reported hospitals straying from reported buying trends for heart rhythm devices, which include pacemakers and defibrillators, according to the report. While St. Jude did not offer discounts, Boston Scientific has and reported a decline in its gross profit margin for the third quarter.

Officials from Johnson & Johnson also noted increased pressure to improve pricing for hospitals. However, new products roll-outs have helped the company to "pad" these losses by convincing medical providers to pay more for improved products, according to the report.

Orthopedic device makers noted a stable trend in buying patterns; however, they said in the report that orthopedic companies have been feeling pricing pressure for years. One contributing factor to this stability could be that orthopedic and heart implants are often considered "physician preference" items, because physicians carry clout in purchasing decisions for these items, according to the report.

Group purchasing organizations also have contributed to hospitals achieving cost savings on commodity products, according to the report.

Read the WSJ's report about medical device pricing pressure.