During the annual shareholder meeting of Medtronic Inc. last week, Chief Executive Officer Bill Hawkins addressed the company's position on relationships with surgeons and the physician community. The nature of and possible conflicts resulting from the relationships between medical device manufacturing companies and surgeons has been of much concern of late. (See, for example DM 5623).

"There is today an active congressional and media debate about how health care companies work with the clinical community to innovate, to teach and to train," Hawkins said in speaking on the issue. He then emphasized that collaboration between the company and physicians and surgeons is "vital for innovation and the health of our industry."

Hawkins then differentiated between the pharmaceutical model, what Hawkins called a "bench to bedside" model, with the Medtronic model "from bedside to bench to bedside." Hawkins pointed out such a model begins and ends with the physician, in an ongoing cycle which leads to rapid, essential product and procedure innovation. Hawkins then accentuated the need to continue strong support for physicians and surgeons, who, he said, "provide us with their innovation passion and unique insights into patient solutions."

Hawkins then acknowledged the potential for conflicts of interest and said Medtronic recognizes its responsibility in ensuring that its relationships avoid these conflicts. "Medtronic is the industry leader and plays a strong ongoing role working to create new standards for financial transparency and conflict of interest disclosure. And we continue to do so," he said. Hawkins concluded his remarks by stating that no matter what future changes and standards are put into place, the company's commitment would remain to do what is right for the patients--Medtronic's top priority.

During a later question and answer period a shareholder stated that in regard to physician payments he was "taken aback" by the dollar amounts involved, and asked if paying such amounts were necessary to obtain good information and if the information could be relied upon.

Hawkins responded by framing the situation of payments into two categories--payments to physicians for intellectual property, and on certain occasions payments to physicians for service arrangements (such as advice on R&D or training education or clinical studies). Hawkins explained a significant portion of the physician payments are for royalties -- when physicians bring ideas they have patented to the company, and the resulting product becomes commercial and successful. For service arrangements, Hawkins said that in this industry, they need to work closely with physicians in order to help train other physicians. Because of the sophisticated nature of some techniques and procedures, doctors are the better people to train and educate other physicians and so Medtronic contracts with those doctors. The company also employs physicians--separate from sales and marketing--in order to assist in clinical studies. "We clearly recognize," Hawkins finished, "our responsibility to make sure the payments to physicians avoid any conflict of interest."

Adapted from a webcast of the shareholder meeting.

Link: http://investorrelations.medtronic.com//eventdetail.cfm?eventid=71819

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