On Sunday, April 3rd, Barry Meier published an expose entitled, "Tipping the Odds for a Maker of Heart Devices." Mr. Meier has been known to report on the potential nefarious backdoor dealings in the medical device industry. Potential is the only word that TSB can use based on the Department of Justice track record, a little more later on the DOJ in this post. Yet, this story takes the reader back to our favorite city, the City of Sin, the city whose commercials should feature Elvis singing Viva Lost Wages, the city that is proud to promote, "what goes on in Vegas, stays in Vegas." Vegas is homogeneous. Americans walking around in their shorts, a cigarette dangling from their mouth, white socks pulled up to their knees, some ridiculous looking tee shirt and their belly hanging over their belts, and TSB is just describing the women. A picture tells a story, don't it? Americans practice paganism paying homage to false gods like Snooki, and the Jersey Shore crowd, the Housewives of Orange County. And then we wonder why there is an outright dumbing down of America.
But this isn't about middle and lower income America. This story is about the magnetic field that surrounds Vegas when it comes to physician and company consulting agreements. Read the following excerpts and one begins to see that wheeling and dealing has become a standard in the medical device industry. Within the last few years a little known German company by the name Biotronik has taken Vegas by storm, and cornered the market on defibrillators and pacemakers at UMC Hospital. Prior to 2008, Biotroniks implants were not used at this facility. So how did Biotronik end up getting 95% of UMC's business last year? You guessed it, the old fashion way. TSB can hear most of you screaming "Consulting Agreement." With consulting fees reaching as high as $5,000 per month, it seems that l'il 'ol Biotronik went from being a nobody to being a somebody in the Vegas market. Today, a federal investigation is examining Biotronik's sales and marketing practices.
Many of you know that in recent years compensation to physicians have come under intense scrutiny. How intense is left up to the imagination. What is utterly ridiculous is how the government once again fails to monitor this practice. The most recent federal law mandates that companies will have to provide full disclosure by 2013 for any payments to doctors for consulting, and other services. Of course, the primary culprit in this activity is the salesperson whom Mr. Meier reports find ways to flatter surgeons or fatten their wallets. The interesting aspect about this expose is some of the comments that are made regarding the salesperson/surgeon relationship.
"One sales person was said to hold a great influence over a doctor." A svengali or dominatrix? "He loves his white wine and being entertained." Never have heard that one before? The most entertaining aspect of this story is that Biotronik officials were quoted as saying,"that Biotronik adhered to an industry wide code of ethics." Of course, it depends upon which code one adheres to. Does Biotronik adhere to the written code, or the unwritten code? There is a difference. So how does a little 'ol company like Biotronic take on the likes of a Boston Scientific, a Medtronic, a St. Jude? Probably the same exact way that many companies in the spine industry do, by maintaining a culture of compliance and ethics. With an ASP of $35,000, and commissions of 25% TSB has to wonder, what the hell are we doing selling in the spine industry? There's gold in 'em hills!
There are many parallels between this story and our industry. A salesperson or distributor becomes successful with a product, the company begins to feel threatened or starts playing games with the distributors commissions, a new company comes along, the distributor is unhappy, and next thing you know the distributor is working for a new company leveraging their relationships in one's quest for the holiest of holy. But contrary to what many perceive about TSB, our opinion is that this behavior is not generated by greed, it is provoked by a lack of respect by corporations in general. TSB is not going to get into the central cast of characters in this investigation but what is interesting is that the Department of Justice continues behaving like a paper lion. In January, St. Jude paid a $16 million dollar fine settling federal charges of giving kick backs to doctors so that they would participate in medical studies, only St. Jude's did not admit to any wrong doing. TSB must admit that is my favorite aspect of all of these settlements. You are fined, but do not admit to doing anything wrong. Incredible.
The plot thickens when Biotronik makes claims that "entrenched relationships between the bigger producers, implant specialists and hospitals have stymied the company's sales growth." But wait a minute, maybe Biotronik has a point. Maybe there is a correlation. As hospitals have become insulated from allowing free market enterprise, ever hear of the Preferred Vendor List (LOL), companies and sales people have become much more creative in how they go about entering and preserving their marketshare and livelihood. Physician's who once had freedom of choice to use their vendor of choice, have become vassals and serfs to their lords, the hospital adminitrator. If the reader doesn't believe it, spare me a minute. Last week, while showing a surgeon a product that clinically had therapeutic value over what he was using, the doctor said, "I want to use this on my next patient, unfortunately, if you are not a preferred vendor, you will have to go through the product evaluation committee and get approval in purchasing." At minimum a three month process. And then we wonder why the U.S. healthcare industry is totally out of control.
Once again, the focus of what is wrong with the system is solely placed on the shoulders of the sales representative. This article talks about sales people earning up to $300,000 per year, playing a variety of roles like technical expert, entertainer, and recruiter. What's disturbing is that the public's and surgeons perceptions of what most sales people earn is immediately tainted with one stroke of a brush. Keeping a doctor happy is no different than keeping a consumer happy whether you sell cars, stereos, build homes, or run a hotel. Unfortunately, once this relationship becomes a dependency, the positive is sometimes outweighed by negative behavior. But Mr. Meier is behind the curve in reporting on old news. Those of us that work within the industry have known of many of these scenarios. Maybe, its time that the media focus on the newest business model that is beginning to take healthcare by storm. The Physician Owned Distributorship. So in closing, TSB wants to know who are the companies that are mastering POD's and how is it effecting your ability to do business in your territory.