St. Jude Medical (NYSE:STJ) snatched a contract from group purchasing organization Novation after its Twin Cities competitor Medtronic (NYSE:MDT) walked away from a similar deal with the GPO in February.
Novation said the 30-month deal, which went into effect April 1, will see St. Jude supply it with cardiac rhythm management products — which were also part of the deal Medtronic spiked, which also included some orthopedic products. It includes provisions for "locally-negotiated pricing and market share growth rebates," according to a press release, and is the first time the two companies have worked together.
Medtronic made headlines — pleased Wall Street — when it canceled several contracts for its cardiovascular and orthopedic products with Novation worth an estimated $2 billion a year. A few weeks later the Fridley, Minn.-based medical device giant spiked a deal with Premier Inc. for some of its spine products.
After the Premier deal ended, Medtronic spokesman Chris Garland told MassDevice in an email that the decision to end both deals were made because the company felt it would do better negotiating contracts directly with hospitals.
“Our only comment is that we are confirming that our spinal business terminated a national contract with Premier,” Garland wrote. “We did this for the same reasons we terminated five Novation contracts earlier.”
Last month, Medtronic CFO Gary Ellis told analysts that spiking the deals wasn’t a strut in a larger strategic plan.
"There’s a lot of speculation around here that a strategic change is going on,” Ellis told analysts at the Barclay’s Capital Investors Conference in Miami. “That is not the case.”
GPOs play a significant role in the delivery of healthcare, Ellis noted, and they’re beneficial in streamlining the process of selling into hospital systems.
“We intend to maintain our relationships with GPOs that are providing a benefit,” he said.
Yesterday, Garland told us Medtronic that the company’s move to combine its cardiac and vascular groups’ sales forces into a single cross-divisional organization is part of its move to deal directly with hospital purchasing administrators.
