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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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