I think it was around 55% of the hospitals in the US that are operating in the red, so increased pressure for pricing relief to provide medical devices should not come as a surprise, as the same is happening with the pharmaceutical end of the business. Some of the stent manufacturers actually stock the hospitals with supplies and the hospital is not charged until the device is used instead of paying up front. This consignment arrangement has been going on for a few years now. BD
BOSTON (Dow Jones)--While hospitals grapple with the economic downturn and the potential effects of health-care reform, they are pushing their financial troubles onto big medical-device companies.
It's having an effect, according to executives at Johnson & Johnson (JNJ), Boston Scientific Corp. (BSX) and St. Jude Medical Inc. (STJ), all of which have reported signs of mounting pressure. It is not a brand-new phenomenon, but it is one that may worsen as hospitals battle to control costs.
"I think it's the new reality," said Jan Wald, a devices analyst with Noble Financial. "I think all the companies are going to be facing stiffer pricing pressure."
St. Jude discussed the issue Wednesday when it reviewed details behind soft third-quarter results. While international sales surged, U.S. growth was weak due to about 50 hospitals either straying from normal quarter-end buying patterns for heart-rhythm devices or pushing St. Jude for price cuts.