In a recent Financial Times article, the newly appointed CEO of Smith & Nephew, Oliver Bohuon stated that the Medical Device Industry should stop whining about the government and government cut backs in funding health related service, and cast aspersions on the device industry by stating that the industry has no one but itself to blame for not developing state of the art, game changing products that would transform the delivery of healthcare and perhaps even reduce health care cost in the long run.
Bohuon is quoted in saying that "when we talk about price erosion 3%-4% many people are blaming this on government austerity measures, but they are wrong. What is happening is that we as an industry are not bringing in enough innovative products to get higher prices....... Innovation is the bread and butter of this business."
Bohuon's belief is that healthcare providers would pay a premium for devices that would save them money. A prime example has been the assault on reducing the ASP for pedicle screws, cervical plates, inter body devices and biologics. Without aggressive innovation companies are left having to drop prices to maintain their success. Squeeze me but please me. The end result, tighter margins and more pressure and stress on the sales force to generate sales in a zero sum marketplace.
So obviously our readers will ask does Bohuon practice what he preaches? S&N intends on investing $300 million over the next 5 years into R&D, the irony of the story is that even with this "mea culpa" moment, S&N is trying to boost margins by cutting jobs, a far less ingenious way than holding the company accountable for lack of innovative. Who knows, maybe if some of the CEO's held themselves accountable the spine industry would be innovative, but its easier to blame the boogeyman than take responsibility for one's actions or lack of actions.
As cost containment escalates, it will be interesting to follow the small fly by night companies that continue to surface with cheaper pedicle screws while expanding their sales with stocking distributors.