Saturday, October 3, 2009

If GE Can Do It, Why Can't We?

On Friday, October 2nd, 2009, the NY Times reported that GE and Wipro, the third largest Indian information company, had struck a deal that will play a significant role in reducing US healthcare cost.

Jeff Immelt, CEO of GE rationale behind the partnership was, that healthcare products and services developed in India "will be exported cheaply to the US cutting prices." There are two reasons for Mssr. Immelt's enthusiasm. GE can export development and manufacturing to a country that has been steadily climbing the economic ladder by offering "cheaper labor" in comparison to the US, and GE can take advantage of India's overall business development plan in spending more on healthcare for its own people.

Analyst's forecast that by the year 2012, India will have a $75 billion dollar healthcare industry, while the US will spend an estimated $4 trillion on healthcare. Mssr. Immelt's rationale was that this strategic initiative would simplify GE's operations while allowing it to take advantage of a new burgeoning market. Simplistically said, India is the new frontier.

But wait a minute! Stop right their! Before we go any further, is this a sign of what the spine industry should expect when it comes to the development and manufacturing of its own products? As reported in a previous blog, Stryker/Osteonics initiated this in the late 90's when Brown, Simpson, and Lipes decided to move manufacturing to Ireland for tax purposes. Then we had Medtronic move manufacturing to Puerto Rico. As recently as a few months ago, under the auspices of Steve McMillan, it was reported that Stryker decided on expanding into India. In his most recent press release, Tony Viscogliosi alluded to setting up shop in Malaysia in exchange for a Malaysian investor's capital. Today, the spine industry has had an influx of Korean companies finding their way across the Pacific Ocean that are attempting to make inroads into the U.S. Healthcare Market, manufacturing products at a cheaper cost. So what's the Spine Blogger's beef?

What ever happened to developing, manufacturing, and buying American? Whatever happened to all those phony "lapel flagpin" gray hair blue suits who talk about loving America? In all the years that I have been in this business, the margins have always been exceptional, indicative by the over 300 spine related companies in our industry, and the behavior of the Wall Street analysts. The European and Asians still see America as a land of opportunity, even if they have trouble negotiating and understanding the American distributors way of doing business. Yes, my foreign friends, you still have a lot to learn! But this article is not about Xenophobia, it's about questioning US companies commitment to export more and more manufacturing overseas resulting in less and less Americans having job opportunities. Even though "supply-side" economist Milton Friedman has passed away, the torch continues to be carried by those loyal to his economic theories. Friedman, originally a Keynesian, became a monetarist believing in a natural rate of unemployment, and argued that the government could not micromanage the economy. But he also had a condescending opinion of Americans. He believed in advocating manufacturing overseas and "dumping" product back into the US, since Americans are "addicted to consumption." As a footnote, Friedman was the original Gordon Gecko, advocating that Greed is as inherent to us, as our DNA.

But this blog is not about debating economic theories, its about where new frontiers are developing, and what will happen to the old wild wild West (the US) unless we some how find middle ground on how this effects those of us on this side of the pond, as my English brethren like to say. I am always leery of any analyst's commentary when they state that these types of business decisions will lead to big changes in the US healthcare system. If American companies are cutting cost the rationale behind it is to sustain or increase margins for shareholder value. IT IS NOT TO CUT THE COST OF HEALTHCARE DELIVERY, indicative of how much we are forecasted to spend by 2012. If the analyst's definition of cost cutting includes reading x-rays and scheduling nursing visits, isn't this taking away American jobs? Who is going to control the quality assurance aspect if we eventually take ALL manufacturing overseas? The FDA? They can't take care of their own house! The companies? Just go visit some of the medical device manufacturing that is done is Mexico, you will be in for a surprise. Eventually, this will lead to an dramatic shift in the way the industry is perceived, all at the expense of the patient. The Spine Blogger wants to know what its readers believe?


  1. Sounds like your commission check is going down. Funny, when the dollars come out of your pocket it's not good. But, when a new tax is imposed on the corporate level, that's acceptable.

    Many, reps argue that they're on top of the device food chain, however, thier surgoens often let them know daily that they're really at the bottom. Companies see the rep as a liability. Insruance companies see the rep as a liability. Hospitals see the rep as a liability, heck many patients don't wish to authorize a rep in the room.

    Want reduced healthcare costs, reduce the "rep as surgeon agent" fees. Reduce commission rates to something pallatable.

    New taxes are not the answer. Seriously, if the device industry is taxed, do you really think that tax will not flow through to you and the end payor?

  2. MDV: I am the first to agree with you that the commission structure must, and will be reduced to something palatable. The reason is that doctors are no longer aligned with just the companies, today, they have created business partnership with distributors. Just look at large physician distribution programs. Ergo the commentary, distributor brokers. You get no argument from me when it comes to the future modification of compensation, because it is coming. As for taxes, I have always been an advocate of paying my fair share of taxes. Companies and financial people always complain because its part of their DNA. When times are great, no one complains, when times are bad, everyone screams bloody murder. Your commentary is well appreciated.

  3. I foresee the device rep moving more to a pharma type compensation plan where a base is set and a bonus/commission structure is maxed out at a particular level. Reps will still make a good living, but the days of 500k - 1m in commissions are fading into history

  4. The Corpo-Fascist Furher of Strykerland, Mein MacMillian would pimp his mother to Zimmer if he thought it would make Wall Street get a hard on. The more Stryker expands the less manageable (what is left of compentent middle management) this corporation becomes. Pretty soon we will be seeing rusty nails sold as pedicle screws. Stryker products are overpriced plasma sprayed knock-offs.

    Strykerland motto is "if our device doesn't kill, infect, break or cause metallosis, than it will only make you wish you were dead and that is OK with Strykerland's high command, because dead people can't sue for defective and cheaply manufactured medical devices."

    Otherwise, look on the bright side, Strykerland just added a few more million lower caste slaves to work in their contaminated filthy plants.