1. In Vivo

Teaming Up to Supply Devices to Managed Care

The desire of managed care customers and group purchasing organizations to be serviced by large distributors is limiting the ability of small- and mid-sized device companies to access customers directly. Smaller companies have responded with reliable service and quality, cost-effective products. In most niche markets, customers have temporarily accepted the small-company argument. But all suppliers expect increased consolidation by customers, suggesting more alliances will be required to sustain innovation and quality throughout the marketplace.

When a group of device CEOs first assembled in Phoenix last October for a two-day conference, 55% cited FDA regulatory hurdles as the most pressing issue facing their companies; 15% cited the influence of managed care. By the second day, following several panels discussing the changing dynamics of the device marketplace, the number citing regulatory hurdles had dropped to 43%. Even more executives, 45%, were by then citing cost containment pressures driven by managed care and capitation as having the biggest impact on the medical device industry (See Figures 1 and 2).

Although the respondents provided their answers to slightly different questions on each day, the shift in judgment regarding the impact...

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